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RBS casts net wider to find Marriott hotels buyer

By James Wallace - Tuesday, May 29, 2012 15:00

Royal Bank of Scotland has begun widening its search for a buyer for its 42-strong Marriott hotel portfolio, with the deal by preferred bidder Blue Coast Hotels hanging in the balance, CoStar News understands.

Blue Coast Hotels, the Indian hotel operator, has been in exclusive talks with RBS since winning the auction process earlier this year, offering £749m – significantly higher than the three shortlisted underbidders – but it is thought they are yet to secure the necessary equity to close the deal. There are understood to have been talks to raise equity from the underbidders.

Deutsche Bank is underwriting the £400m-plus senior debt behind Blue Coast Hotels' bid, supported by mezzanine finance from Starwood Capital and Fortress Investment Group.

Blue Coast Hotels is advised by KPMG, Pinsent Masons, Beaufort International Associates and an advisory firm headed by Sreejit Tagore.

While RBS has not given up on Blue Coast Hotels' bid, it is understood to be planning for the potential failure and will look also to return to those underbidders.

RB Capital’s £650m bid, was supported by around £325m of senior debt from UBS with additional financing from Far East banks.

Sadruddin Hashwani, chairman of Hashoo Group which is the largest Marriott hotel franchise operator in Pakistan, was the third-placed bidder, offering around £600m, again with UBS underwriting a £325m senior loan, with the balance in equity. Sahara Group completed the four-strong finalists with a cash offer of just over £500m.

The three finalists, however, are thought to be, to different extents, pursuing alternative acquisitions which may restrict their continued interest.

At the start of the year,  the process – run by administrator Ernst & Young, with Hawkpoint and Jones Lang LaSalle Hotels advising RBS – included early bids from ADIA, the sovereign wealth fund, and TPG, the global private equity firm, at between £450m and £500m each, while RBS’ own property company subsidiary The West Register also offered around the £500m mark.

RBS, however, remains unlikely to sell at these levels given at least three bids significantly north of £500m.

Last summer when RBS enforced on the defaulted £700m loan securing the previous owners' – Quinlan Private, Delek Real Estate and Blenheim Properties Group – joint venture ownership, the 42 UK-wide hotel portfolio was valued near £1bn. RBS enforced after a consensual debt-for-equity restructuring of the portfolio failed.

The consortium of investors bought the hotel portfolio from RBS, which acquired them through the £951m takeover of Condor, a company jointly owned by Whitbread and Marriott International, in April 2006.

The portfolio of 42 four- and five-star hotels in England, Scotland and Wales has around 8,000 rooms and is operated by Marriott International under a 30-year management agreement which expires in 2036.

All parties declined to comment.

jwallace@costar.co.uk