Singapore-listed hotel investment firm First Sponsor late last week announced the acquisition of the Westin Bellevue Hotel in Dresden, Germany for €49.5 million ($55 million), a purchase which adds to the close to €400 million the CDL Group affiliate has spent since 2017 building a collection of 17 European hospitality properties.
Under the terms of an agreement announced to the Singapore exchange, First Sponsor will acquire 94.9 percent of two German companies that own and operate the 340-room Westin Bellevue Dresden hotel, a renovated 17th century property which overlooks the Elbe river and the city’s old town.
The remaining 5.1 percent stake will be retained by German hotel operator Event Group, which previously partnered with First Sponsor, which is controlled by CDL chairman Kwek Leng Beng, in 2017 to acquire the Pullman hotel in Munich, and the 16-property Bilderberg hospitality portfolio in the Netherlands.
A History of Profitability
“The Acquisition offers a good opportunity for the Group to invest in Dresden’s hospitality real estate market and thereby further expand the recurrent income base of the Group’s property holding business segment, as well as to diversify the Group’s geographic exposure,” said First Sponsor’s CEO Neo Teck Pheng in a statement to the Singapore stock exchange.
The latest hotel to join First Sponsor’s list of European properties sits on 31,972 square metres (344,143 square feet) of land and has a gross floor area of approximately 40,700 square metres, including 1,800 square metres of meeting and event space, as well as a swimming pool, fitness centre, two restaurants, and a beer garden.
The historic property generated €3.75 million in EBITDA in 2018, suggesting a 7.6 percent yield based on the agreed upon price. The property has been profitable since at least 2008, according to First Sponsor, which expects to complete the acquisition within the first half of 2019.
Betting on Silicon Saxony
First Sponsor says that it expects to spend €10 million renovating the asset in the near future. “Such CapEx investments, coupled with the uptake in the German hospitality market, bode well for the future trading performance of the Hotel,” the firm said in a statement.
According to Mingtiandi estimates, the hotel derived €8.5 million in revenue from rentals last year, based on its average occupancy rate of approximately 69.1 percent, which is three percentage points above the Dresden average, and its average room rate of €99 per night is 30 percent above the average for hotels in the area.
Silicon Saxony, as the city is nicknamed has close to 550 hotels, had approximately 4.4 million overnight stays last year, driven by 1.35 million MICE visitors, and 1.7 million airport passengers. There are 50,000 companies in the area, including Volkswagen, GlaxoSmithKline, and Simen, according to a company report.
A Family Affair
The Bellevue is the latest installment of a European hotel buying spree for First Sponsor that goes back to 2017. That year the company acquired the Pullman hotel in Munich for €98 million, the Bilderberg portfolio in the Netherlands, as well as the 300-room Le Méridien Frankfurt Hotel for €85.0 million ($100.1 million).
In January of 2018 First Sponsor followed up by purchasing 24.7 percent of the Hilton Rotterdam hotel for €12.3 million from a subsidiary of NYSE-listed Park Hotels & Resorts. By the end of last year the company had generated S$40 million ($29.5 million) in revenue — up from S$15 million a year earlier.
The Kwek family established First Sponsor through participation by Millennium & Copthorne Hotels, a London stock exchange-listed hotel chain controlled by its Hong Leong Group, along with privately held Singapore holding firm Tai Tak Estates. The Kweks have also been ramping up investments in Europe in the last five years through City Developments Ltd.
First Sponsor’s hotel holdings in Europe at the end the fourth quarter included The Hilton Rotterdam Hotel, Le Meridien in Frankfurt, and Arena Towers in Amsterdam, in addition to 13 of the original 17 Netherlands properties included in the Bilderberg portfolio, which the company acquired for €171.4 in 2017, and partially sold in the last quarter of 2018. Germany and the Netherlands now account for 43 percent of First Sponsor’s S$2.38 billion in assets.
In January of this year, the company announced its €9.3 million acquisition of a 65-room former hotel in Milan from a fund owned by French baking group BNP Paribas. In a January 25 stock exchange announcement, the company disclosed the property is subject to ongoing litigation, in which an ex-tenant alleges BNP Paribas agreed to sell it the property for €6.1 million, and that the French bank is now obliged to fulfill that obligation.
A hearing on the case will be held on March 19, and a ruling is expected by the end of the year, but the litigation could prolong for up to eight years if it is appealed to the Italian Supreme Court, according to First Sponsor.