€1bn to be spent on hotel assets, says Dalata

About €1 billion will be spent on buying Irish hotel assets this year, Dalata chief executive Pat McCann predicted yesterday. He was speaking following the publication of Dalata’s interim results for the first six months of this year.

The Irish hotel chain, which operates the Maldron brand, reported a 31 per cent rise in revenues to €34.9 million.

Its earnings before interest, tax, depreciation and amortisation (ebitda) for the half year rose to €2.4 million from €900,000 a year earlier. The group is forecasting ebitda for the full year of €7.5 million to €8 million.

In its presentation to investors yesterday, Dalata said 27 hotel transactions have been completed in Ireland in the year to date for about €200 million in total.

In addition, Ulster Bank is currently selling eight hotels as part of Project Nadal while the National Asset Management Agency is selling three hotels (the Malton in Killarney, the Ormonde in Kilkenny and the Gresham Metropole in Cork) under the title Project Venue.

Dalata has been active in the market too. Yesterday, it announced the acquisition of the 93-bedroom Tower Hotel in Derry for £4.4 million. Earlier this year, it spent €29.7 million buying the Maldron on Parnell Square and the Pearse Hotel, both in central Dublin.

It has also agreed a deal with private equity group Blackstone to acquire its 25 per cent interest in the companies behind the Clyde Court and Ballsbridge hotels for €21.8 million.

These hotels were acquired by property developer Sean Dunne in 2005 for €400 million but have since been taken over by his lenders. Mr McCann said Dalata would be interested in acquiring the interests held by Ulster Bank and Rabobank, which would bring the transaction cost up to about €100 million and give it full ownership of the sites. "To date, we haven't had the clear view from them as to what their plans are," he said, adding that he expects a decision within a "number of weeks".

Mr McCann said Dalata plans to leverage off the €256 million in net proceeds generated by its flotation in March to help fund 20-plus acquisitions over the next three years.

“We’re talking about probably in the region of €500 million [in debt and equity spend on acquisitions],” he said. “We raised €256 million and we’ll leverage on that. It’s a sizeable fund.”

On where it might source its debt given that so many Irish and international banks have had their fingers burned on hotel assets here over the past decade, Mr McCann said: “We’ve had a lot of interest, from the Irish banks and from the UK banks. We don’t believe there will be any issue around debt funding.”

Dermot Crowley, deputy chief executive with responsibility for business development and finance, said there has been "very strong" interest from AIB, Bank of Ireland and Ulster Bank.

Mr McCann also confirmed that it has reached an interim agreement with Brehon Capital to continue to manage the Citywest Hotel in Saggart, Co Dublin until January.

The 770-bedroom Citywest property was developed by the late businessman Jim Mansfield. Brehon closed on the €29 million transaction yesterday. Dalata has managed the hotel since it was placed into receivership by Bank of Scotland (Ireland).

Dalata’s portfolio currently comprises 39 hotels in Ireland and Wales with more than 5,800 bedrooms. These are either company owned, leased or managed properties and gives it a 9.4 per cent share of the hotel sector here.