De Vere Group is formally launching the sale of its mid-market Village hotels chain, the last and biggest chunk of Lloyds’ hospitality portfolio which could attract bids of around £450m.
The 25 hotels of Village Urban Resorts, comprising 3,100 rooms, have attracted unsolicited interest and could entice bids from US private equity groups, real estate companies and strategic interests as the debt financing market improves and investors look beyond London for hotel assets.
JPMorgan is conducting the sale. A first round of bids will be concluded by the middle of August with a second round scheduled to take place in late September. The sale is expected to be completed by the end of November.
Lloyds took over De Vere in 2010 following its acquisition of HBOS which had accumulated £1.75bn of bad loans from the hospitality business.
The bank wrote off £650m when it converted debt into preferred ordinary shares to save De Vere from collapse. It recouped £232m from the 2013 sale of Venues, its conference division, and £136m from other hotel disposals including the Grand Hotel in Brighton, and non-core assets.
The sale of its six golf resorts, including the flagship Cameron House on the banks of Loch Lomond, is expected to fetch a further £160m.
The Village chain sale will take a sizeable chunk out of Lloyds’ remaining debt, but still leave the bank having to write off another significant amount.
A sale of Village in the region of £450m will take Lloyds’ disposals from De Vere to around £980m, still £120m short of its £1.1bn target.
Lloyds last year realised about £360m from the sale of the Principal Hayley group of 23 hotels to Starwood Capital.
De Vere estimated the property value of the chain to be worth £410m at the end of last year. Three venues are being built in Scotland and there is a pipeline of nine further sites.
Andrew Coppel, De Vere chief executive, said: “The bank has been hugely supportive of both management and the business, evidenced by the fact that we have been able to invest £120m in the past four years.”
Village is projecting revenues this year of £165m and earnings before interest, tax, depreciation and amortisation of £44m, before central costs, both slightly ahead of 2013.
Its hotels are in out-of-town locations and its mid-market concept offers accommodation, and restaurants and a gym under one roof.
“This is a peach of a business and a real opportunity for a new owner,” said Mr Coppel, former chief executive of Queens Moat Houses, who was brought in by Lloyds in 2010 to steady the group and prepare it for disposal.
De Vere was created out of the hotel assets of brewer Greenall and then sold in 2006 to Alternative Hotel Group, run by property entrepreneur Richard Balfour-Lynn, in combination with HBOS.