STAKIS ACQUIRES COBURG IN PROPERTY PUSH
THE Stakis management team flew into London last week to announce that the once-shaky hotel company had doubled its London hotel presence, and was asking its shareholders to fork out £67m for more purchases.
By now, investment analysts and the media are so familiar with the Stakis story of successful turnaround that its chairman, Sir Lewis Robertson, has reduced it to a concise soundbite.
In a nutshell, Stakis is "sharply focused" on hotels and casinos, has a strong and close-knit management team, has turned two years of losses into a £10.4m profit in the year to October 1993 and is now seeking to expand.
Chief executive David Michels said Stakis had bought the 132-bedroom Coburg Hotel in Bayswater, London, for £9.5m from its receivers. The hotel had been managed under contract by Resort Hotels since September 1992. Stakis has also agreed to buy the four-star, 108-bedroom Airport Ambassador Hotel at Norwich, Norfolk, from private owners for about £6m. The Norwich hotel was built four years ago.
In order to pay for the two acquisitions and other potential purchases in the pipeline, Stakis launched a one-for-four rights issue, which will raise £67m from shareholders.
Stakis has also made new banking arrangements with four leading banks - Royal Bank of Scotland, Bank of Scotland, Clydesdale Bank and Barclays - to provide longer-term debt of £170m. The bank facility and rights issue would provide funds for a "series of largely hotel and casino acquisitions" over the next year, said Sir Lewis.
STRATEGY
Mr Michels said the acquisition strategy would be limited to hotels of more than 100 bedrooms in prime locations and of good three- or four-star quality. He said Stakis was not looking to fill geographical gaps in its hotel network, but was looking for hotels which could produce high returns under Stakis management.
The Coburg has been running at an occupancy of around 70% but at a rate of around £33 per night because it is filled with tour business. The Norwich hotel is producing an operating profit of £1m per year and in this case Stakis is buying profit which could be improved.
Asked how Stakis could improve performance at the Coburg, Mr Michels said the hotel was committed to a certain amount of tour business through the summer, but thereafter the Coburg would benefit from Stakis' corporate clients and its successful short breaks programme.
Mr Michels said Stakis was looking at a large number of similar purchases which may or may not come off before the end of the year. "The window of opportunity for hotel purchases will be there for at least another year," he said.
Asked if Stakis was bidding for any Resort or Queens Moat Houses surplus hotels, Mr Michels said he was not interested in any of the QMH hotels so far on the market, but would consider others. He was not interested in Resort, he said.
There is also no target number of hotels for Stakis. "Stakis does not need to have 50 or 70 hotels [the new purchases brings it to 33] but there is benefit if we can add to the portfolio without adding to central costs," he said.
