Strategic Hotel Capital ‘Logical Buyer’ Of Hospitality Europe, Says Geller

CHICAGO— It’s a done deal that Laurence Geller, CEO of financially armed Strategic Hotel Capital, wants to buy the portfolio of Hospitality Europe BV. What’s not happening, according to Geller— and contrary to recent reports— is that both parties are a hair’s breath from inking agreements in what may be a half-billion-dollar deal between the two major hotel owners. “It’s just not evident that there’s anything happening there yet,” said the CEO, in terms of moving forward. “At the right time, I hope they’ll be the seller and we’ll be the buyer.” The portfolio in question consists of eight properties, all “deeply encumbered,” said Geller, mostly with management contracts via Starwood Hotels & Resorts. The properties include: the 1,020-room Sheraton Frankfurt Hotel & Conference Center at Frankfurt Airport; 388-room Hyatt Regency Paris at Charles de Gaulle Airport; 459-room Sheraton Stockholm Hotel & Towers; 297-room Sheraton Brussels Airport and 128-room Four Points by Sheraton, Brussels, Belgium; 408-room Sheraton Amsterdam Airport Hotel & Conference Center at Schiphol Airport and the 266-room Hotel Pulitzer (Sheraton), Amsterdam, The Netherlands; and a 314-room Renaissance (Marriott) Prague Hotel, Prague, Czech Republic. “We have had extensive conversations with them [HEBV]. We’ve been interested in this for well over a year, but it’s a very complicated situation,” said Geller, citing airport leases connected with 50% of the properties, capital expenditures, “and Europe’s market being what it is.” Reports estimated the portfolio price tag running between $494 million up to $601.5 million. “Charles [McGregor, CEO of HEBV] and I both believe at some stage it’s not illogical for us to be together. That’s certainly from a synergistic point of view and a logical thing that he and I agree. So we’ve talked about it many times,” added Geller. Geller confirmed there was “a process” at one point “This thing was out in the open market; we were bidding for it. Things change.” The CEO doesn’t believe there are any other bidders for the portfolio. “To the best of my knowledge, there was a process that isn’t going on at the moment,” said Geller, adding, “I still say we’re the logical buyer for it. And at some stage, if it’s appropriate, we’ll be a buyer if they want to sell it.” Moving such transactions forward always comes down to two things in any negotiation, the bid and the ask, and it’s no different in this case, said Geller. “They’ve got lots of strategic options. They can hold it; there’s no crisis. They can sell off individual assets if they want to liquify some of their portfolio or they could sell the whole company.” Although he’s not opposed to one-offs, from his standpoint, buying “in bulk” is easier for SHC, said Geller. “It’s the same amount of work to do one deal as it is to do five deals.” Geller also has expressed an interest in acquiring one, several or even all of the 25 trophy properties in the CIGA portfolio now being aggressively marketed by Starwood Hotels & Resorts via a triad of international banks. Stating he wants 30% of the SHC portfolio outside the U.S., Geller said “it would be stupid if we didn’t” go after the European properties. The assets are encumbered by Starwood management contracts, with a no-reflag restriction post-sale. The current price tag for all the CIGA assets, including 6,000 acres in Sardinia, is $1.68 billion. “We still want to buy CIGA. As far as we’re concerned, we have the financial capability with or without this [HEBV] acquisition. We’ve got plenty of capacity to do both if we wanted to,” said Geller, “but CIGA’s a long way from being sold. [And] HEBV is a complicated asset which may or may not get sold one day.” Still, admitted Geller, “HEBV’s a portfolio of assets we’d love to get a hold of. We’ve had conversations because we are a logical buyer if, and when, they’re a seller.”