PPHE to launch a European Hospitality Real Estate Fund of up to €250 million equity

PPHE Hotel Group, the international hospitality real estate group which develops, owns and operates hotels and resorts, is pleased to announce that it is in advanced discussions with a potential cornerstone investor with a view to launching a new European Hospitality Real Estate Fund (“the Fund”) of up to €250 million equity. It is the intention of PPHE that the Fund will launch with the initial contribution of its existing asset in Rome and an equity commitment of up to €75 million from a cornerstone investor (with an upper limit of 49% participation). Launch would also be subject to regulatory approval.

The Fund would enable the Group to further accelerate its strategy of identifying, acquiring and developing attractive hotel assets across a range of key European markets. This is consistent with PPHE’s longstanding approach to building shareholder value through the careful stewardship of its own balance sheet and partnership with third party capital providers. Investors in the Fund would be able to benefit from and tap into PPHE’s integrated owner-operator model, driving optimal operating performance through enhanced access to world recognised brands as well as an uplift in real estate value.

The Fund would also further drive the growth and value of PPHE’s scalable hospitality management platform, as PPHE will be appointed as the hotel management company for all hotels acquired through the Fund. PPHE is in advanced discussions with a cornerstone investor and anticipates that the transaction will sign imminently. However, there can be no guarantee that negotiations will ultimately be successful. PPHE will make a further announcement in due course.

PPHE intends to participate in the Fund for an amount up to €50 million in cash and/or assets with a cornerstone investor participating for an amount up to €75 million (with an upper limit of 49% participation). It is the expectation that in the coming year, additional investors will be able to participate for the remaining €125 million equity, following the receipt of regulatory approval.

It is the intention of PPHE that the existing PPHE Rome asset, which is currently undergoing refurbishment and repositioning ahead of its opening as Italy’s first art’otel will be contributed into the Fund as a seed asset by PPHE, this hotel will be managed by the Group under its hospitality management platform.

This new Fund would represent another significant step forward for PPHE strategically, as we continue to expand our leading portfolio of premium hotels while also taking advantage of our unique flexible and scalable in-house hospitality management platform. The Fund would enable us to accelerate our ability to capture the attractive opportunities we see in front of us, via the use of non-dilutive third-party capital, while also playing to our strengths as a fully integrated acquiror, developer and manager of attractive city centre hotels. This would also provide a compelling financial return profile for all Fund investors, including PPHE, helping to further drive our future growth and enhance returns for our own shareholders. Boris Ivesha, President & CEO of PPHE Hotel Group

Fund Highlights

• PPHE would enter into hotel management contracts for each of the Fund’s owned hotels, growing the hospitality management platform of PPHE as the Fund hotel portfolio grows.
• Where appropriate, PPHE would leverage its access to Radisson Hotel Group’s portfolio of brands, which provides instant access to global distribution and booking platforms, reward programmes and customer databases, and a wide range of commercial benefits.
• Upon success of a further capital raise and achieving an IRR target (Hurdle) rate during the Funds’ entire lifecycle, PPHE would be able to earn further incentives.
• PPHE would have asset and development exposure from its participation.
• The Fund is intended to demonstrate the full asset lifecycle approach inherent within PPHE’s differentiated and fully integrated buy / build / manage business model.
• Attractive opportunities falling within the Fund’s investment criteria during the investment period shall be pursued through the Fund.