S’pore fund bids for London hotel

Alison Tudor & Kris Hudson

The Wall Street Journal

Government of Singapore Investment Corp. is among a handful of cash-rich buyers seeking to buy Grosvenor House Hotel, a London landmark, from Royal Bank of Scotland Group PLC, people familiar with the matter said.

The hotel was expected to fetch a record price for a European hotel and flag the return of trophy asset sales to overseas buyers. The Grosvenor House Hotel carries a price tag of about £500 million ($727.1 million). This would make it the biggest amount garnered for a single European hotel, according to consultancy firm HVS.

But the sale process may be extended over the coming months if the euro-zone crisis deepens, causing bidders to drag their feet over paperwork in the hope the price will drop.

Singapore’s sovereign-wealth fund is among the final bidders for the hotel, the people said. GIC has teamed up with Host Hotels & Resorts Inc., a U.S. lodging and real-estate investment trust. GIC’s real-estate investments include the Franklin Center in Chicago and the Bluewater Shopping Centre in the U.K.

The global financial slowdown prompted a reduction in investment by sovereign-wealth funds in 2009, though their pace of spending picked up at the end of year, according to recent reports by the Monitor Group, a consultant in Cambridge, Mass., and by Fondazione Eni Enrico Mattei in Venice, Italy. Among the biggest-spending funds last year were the Qatar Investment Authority and China Investment Corp.

Hotels typically bounce back more quickly than other commercial real estate in an economic recovery.

“The sale could help unblock the current impasse in the European high-end property market and release some hotel stock,” said Russell Kett, managing director of HVS’s London office.

However, Mr. Kett warned it was still too early to call a full-blown recovery and he didn’t expect to see the loan-to-value ratios seen in the past few years again any time soon. Hotel investment volumes hit a record low of €3 billion ($3.69 billion) in 2009 across Europe, according to an HVS report. Overseas buyers retreated as familiarity with domestic laws became more important, with currencies fluctuating and banks preferring to lend closer to home.

London-based hoteliers weathered the financial crisis better than their European peers, helped by the pound’s weakness against the U.S. dollar and the euro, as well as visitors ahead of London’s hosting of the Olympics in 2012.

Grosvenor House Hotel is owned by RBS, and CB Richard Ellis Hotels Group is running the auction.

After two years of sharp declines in real-estate values, U.K. banks such as RBS, which is 84% government-owned, have been trying to reduce their exposure to the commercial- and residential-property sectors as prices have recovered in recent months.

The property, a five-star establishment with 494 rooms over eight floors, has been operated by JW Marriott Hotels & Resorts since 2008, at the conclusion of its £135 million refurbishment.

The hotel, which opened in 1929, is situated in Mayfair overlooking Hyde Park. The hotel boasts the largest banqueting room owned by a five-star hotel in Europe, called the Great Room. The room used to be an ice rink where royalty learned to skate. It is also the first British hotel to have a bathroom in every room.


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