Nomura is forced to rethink Le Méridien sale and leaseback

The slump in hotel property prices has caused Nomura to cut back plans to raise £1.25bn from its Le Méridien hotels in Continental Europe and the USA in a sale-and-leaseback deal.

Nomura has scaled its target down to £750m, which it hopes to achieve over the next two years on sale-and-leaseback arrangements for some of Le Méridien's overseas properties.

David Harper, associate director of Insignia Hotels, one of Nomura's advisers, said that any deals in the USA would be the last to complete, as hotel values there had been hit harder than in Europe and would take longer to recover.

According to hotel valuation consultant HVS International, hotel values decreased on average by 2.6% across Europe last year compared with a rise of 7.8% in 2000.

Harper said Nomura was offering three £250m groups of four or five hotels to banks for sale and leaseback.

It is understood that one group consists of the Ritz hotels in Barcelona and Madrid, the Eden in Rome, and the Excelsior Gallia in Milan.

Nomura has reportedly had trouble finding one bank prepared to make a £1b-plus transaction similar to the one which the Royal Bank of Scotland made last year.

The bank paid £1.25b for 12 Le Méridien UK hotels. Nomura pays a percentage of each hotel's turnover as an annual rent. The percentage varies between 25% and 35% on average.

by Ben Walker