Prem Group to spend €168m on European hotels

Prem Group, the hotel management business of property developer Paddy Kelly, and Goodbody Stockbrokers are spending €168 million on the purchase of 11 three- and four-star hotels in Belgium and France, and the expansion of the chain into northern Europe.

Goodbody Stockbrokers is seeking €22.3 million from investors to expand European Hotel Consortium (EHC), the 50:50 joint venture it formed with Mr Kelly's company earlier this year.

Just over €120 million is being spent on acquiring 11 hotels, 11 serviced apartments and management contracts on two hotels. A further €45.8 million will be spent buying more hotels across Europe. Transaction costs will be €2.2 million, bringing the total investment to €168 million.

Of the 11 hotels being acquired, seven have already been taken over and another four currently managed by the Prem Group are being bought. EHC is taking over a total of 1,437 bedrooms.

The hotels are run under the Holiday Inn, Express by Holiday Inn, Golden Tulip, Ramada Plaza and Crowne Plaza brands and based in the Belgian cities of Brussels, Bruges, Antwerp, Liege, Hasselt, Mechelen, Ostend and Ghent. One of the hotels is based in Calais, France.

EHC is planning to expand the chain into Germany, Poland and the Netherlands.

Of the total investment, €123.5 million will be raised in bank debt. AIB is providing €88.95 million, while the remaining €34.5 million will be raised from other banks.

Prem Group is matching the €22.3 million investment from Goodbody's private clients in part with the €12.1 million it has already invested in EHC through the acquisition of seven hotels.

A further €8.66 million has been taken as "a deemed subscription" from the transfer of the Prem Hotels to EHC because the value of the acquired hotels has risen by €10 million since they were taken over.

The hotels were transferred at a cost of €46.2 million rather than at an agreed value of €54.86 million, according to an executive summary of a memo that has been prepared for prospective investors.

The difference in the value has been taken as part of the Prem Group's investment in the expansion. The hotels were valued at €57.35 million by estate agents Savills in London in August, the memo says.

Cash profits realised after the repayment of bank debt will be split 50:50 between Goodbody Investors and Prem's investors.