PPHE unlocks equity through Joint Venture

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24 June 2021

PPHE Hotel Group Limited
(the ''Group'' or the ''Company")

PPHE unlocks £113.7 million of equity through a joint venture with Clal Insurance

PPHE Hotel Group, the international hospitality real estate group which develops, owns and operates hotels and resorts, is pleased to announce that it has agreed terms to enter into a joint venture with Clal Insurance ("Clal"), one of Israel's leading insurance and long-term savings companies, in respect of two of the Group's prime London assets. PPHE will receive a cash consideration of £113.7 million as part of this transaction, enabling the Group to pursue new opportunities to accelerate growth.

Boris Ivesha, President & CEO of PPHE Hotel Group, comments: "We are excited to partner with Clal on Park Plaza London Riverbank and our art'otel london hoxton development, which reflects our mutual confidence in the strength of the London hospitality real estate market. The agreement values its assets at the Group's latest EPRA NAV level and the proceeds will enable the Group to pursue new growth opportunities as the pandemic period subsides."  

On completion of the transaction, Clal will become a minority partner and owner of 49% of the shares in one joint venture company ("JVCo") holding indirectly the real estate and operations of both the 646-room Park Plaza London Riverbank ("Riverbank") and the 343-room art'otel london hoxton development project ("Hoxton"), which is scheduled to open in 2024. The Group remains the majority owner of the hotels by retaining a 51% holding in JVCo and through its management company has secured a 20-year hotel management agreement in respect of both hotels.         

The total price paid by Clal in connection with the transaction amounts to £113.7 million in cash and a further cash injection of £12.1 million to fund their portion of the remaining equity commitments of the art'otel london hoxton development project.  This consideration, taking into account existing bank debt and remaining development costs, is based on a £263 million property valuation for Riverbank and an all in development budget cost, which includes the fair value of the land, of £279.3 million for Hoxton.  A further breakdown of the purchase price is provided in the table below.

Clal will also be granted 5 million share appreciation rights ('SAR') to have a value upside if the gap between the Group's latest reported EPRA NAV and its' current market price narrows over the maturity period. The SAR has a 7-year maturity with a strike price of £16 per share and the upside is capped at £21 per share. Settlement of the SAR will be in either Company shares or cash.  As an example, should the market price of the Company's shares increase by 27% from its current price of £16.50 to £21.00, Clal will be entitled to approximately 1.2 million shares (2.8% of the currently outstanding share capital), or £25 million. 

The transaction largely reflects the values that have been included in the Group's EPRA NAV per 31 December 2020 of £22.08 per share.

The transaction will result in an increase of the Group's cash position of £113.7 million. The Group is currently analysing the accounting treatment for the transaction and will report this in its' interim financial statements. In 2020, Riverbank and Hoxton contributed a £10.7 million loss to the consolidated loss of the Group.  The book value of the properties as at 31 December 2020 amounted to £271.2 million.

The joint venture arrangements between the Group and Clal contain customary exit provisions which include a right for Clal to require a sale of either or both of the companies which own the hotels following 7 years from completion or earlier in a change of control of PPHE and certain events of default. If triggered, such provisions afford the Group a pre-emption right in respect of such companies.

The Group has also given certain guarantees to Clal regarding completion of the art'otel london hoxton development project.  PPHE's obligations under all of the above arrangements are, to the extent they are not within PPHE's sole discretion subject to a cap which is below the threshold for a class 1 transaction (as defined by the UK Financial Conduct Authority's Listing Rules).

The transaction is expected to complete on or before 30 June 2021.

The transaction constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules, and, as such does not require PPHE shareholders' approval.

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Notes to Editors

PPHE Hotel Group is an international hospitality real estate company, with a £1.7 billion portfolio, valued as at December 2020 by Savills and Zagreb nekretnine Ltd (ZANE), of primarily prime freehold and long leasehold assets in Europe.  

Through its subsidiaries, jointly controlled entities and associates it owns, co-owns, develops, leases, operates and franchises hospitality real estate. Its primary focus is full-service upscale, upper upscale and lifestyle hotels in major gateway cities and regional centres, as well as hotel, resort and campsite properties in select resort destinations.

PPHE Hotel Group benefits from having an exclusive and perpetual licence from the Radisson Hotel Group, one of the world's largest hotel groups, to develop and operate Park Plaza® branded hotels and resorts in Europe, the Middle East and Africa. In addition, PPHE Hotel Group wholly owns, and operates under, the art'otel® brand and its Croatian subsidiary owns, and operates under, the Arena Hotels & Apartments® and Arena Campsites® brands.

PPHE Hotel Group is a Guernsey registered company with shares listed on the London Stock Exchange. PPHE Hotel Group also holds a controlling ownership interest in Arena Hospitality Group, whose shares are listed on the Prime market of the Zagreb Stock Exchange.

Company websites: PPHE Hotel Group | Arena Hospitality Group