Starwood to Pay £800 Million for London West End Hotel Portfolio

Tourists in Piccadilly Circus in London, UK, on Friday, August 4, 2023. The return of international tourists and the gradual return of mostly office-based working has seen footfall in London’s main leisure districts begin to normalise after collapsing during the pandemic. Photo by Chris J. Ratcliffe/Bloomberg

(Bloomberg) — Starwood Capital Group LLC has agreed to buy a portfolio of London hotels for about £800 million ($1 billion), people with knowledge of the matter said.

The private equity firm will buy the properties from Edwardian Hotels, the people said, asking not to be identified because the deal isn’t yet public. The hotels operate under the Radisson Blu Edwardian brand and are concentrated in London’s West End districts in locations including Covent Garden, Kensington and on Oxford Street.

Edwardian Hotels will retain its five-star properties in Mayfair, Leicester Square and Manchester under the terms of the deal, which could be announced as early as this week, the people said.

Representatives for Starwood, Edwardian and Jones Long LaSalle Inc., which brokered the sale for Edwardian, all declined to comment.

Almost a third of the £2 billion of UK hotel deals closed last year happened in the final quarter, according to broker Knight Frank, as investors adjusted to the impact of rising interest rates. Still, overall investment volumes were the lowest since the pandemic year of 2020 and the second lowest since 2012 as higher borrowing costs and an uncertain economic outlook weighed on demand, the broker’s data show.

Edwardian’s properties suffered from the collapse in tourist demand during the peak pandemic years of 2020 and 2021, but occupancy began to recover in 2022, the group’s latest accounts show. The company was founded in 1977 by Chairman Jasminder Singh, who bought the group’s first hotel, the Vanderbilt in South Kensington, the following year, according to its website. Singh’s son Inderneel took over as chief executive officer of the group in 2022.

Tourists in Piccadilly Circus in London, UK, on Friday, August 4, 2023. The return of international tourists and the gradual return of mostly office-based working has seen footfall in London’s main leisure districts begin to normalise after collapsing during the pandemic. Photo by Chris J. Ratcliffe/Bloomberg

The group will now focus on the high-end properties it is retaining, including the 350-room Londoner on Leicester Square that opened in 2021.

Private equity firms are sitting on vast piles of cash they raised to invest in real estate, but have held back from deploying those funds while asset values gradually react to higher rates. With markets now betting that rates are at their peak and cuts could soon be on the horizon, brokers including Knight Frank are forecasting a revival in dealmaking this year.

For Starwood, the deal offers a rare chance to acquire a collection of hotels in London’s West End with future potential for rebranding or redevelopment.

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