PPHE Hotel Group has agreed terms to enter a joint venture with Israel-based Clal Insurance in respect of its Park Plaza London Riverbank and Art'otel London Hoxton development.
PPHE will receive £113.7m as part of the transaction, enabling the group to pursue new opportunities to accelerate growth.
The deal values the 646-bedroom Park Plaza London Riverbank hotel and the all-in development cost budget of the 343-bedroom Art'otel London Hoxton in Shoreditch at £542.3m. The development of the Hoxton hotel is due to complete in the first quarter of 2024.
On completion of the transaction, expected on or before 30 June, Clal will become a minority partner and owner of 49% of the shares in special purpose company JVCo, indirectly holding the real estate and operations of both the Riverbank and Hoxton hotels.
PPHE will remain 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.
Eli Papouchado, chairman and founder of PPHE Hotel Group, said: "We are excited to enter into this joint venture with Clal on Park Plaza London Riverbank and Art'otel London Hoxton, which are strategic assets in our award-winning portfolio.
"Clal's investment reflects our mutual confidence in the strength of the London hospitality real estate market. The agreement values these two assets at the group's latest net asset value and the proceeds will enable the group to pursue new growth opportunities as the pandemic period subsides. The joint venture with Clal comes at a very exciting time as we look to rebuild our business, capitalising on the extensive investment programmes, which we completed just before the pandemic struck."
Boris Ivesha, president and chief executive of PPHE Hotel Group, added: "Clal is set to join our journey of growth at an exciting time as our recovery has started with the hotels reopening on 17 May, opening their doors to domestic leisure guests with international travel expected to return when restrictions are eased or green corridors are introduced as recently was the case between Israel and the UK."
CBRE advised Clal Insurance.