Starwood Capital has made its first investment in Denmark, in what could preface a much larger strategic push into the Scandinavian hotel market.
It has teamed up with local hotel mogul Petter Stordalen and his Strawberry group, with the pair aiming to work together on opportunities in the region. The move has been welcomed by industry insiders, as an opportunity to shine a light on a part of the world ignored for too long by the brands, with the potential to shake up the sleepy blackwater.
The initial deal involves the acquisition of Strawberry’s landmark hotel in Denmark, the Skt. Petri, a 288 room luxury property, in a deal estimated to be worth EUR144m. Strawberry will continue to manage the hotel in the short to medium term, while the new owner explores the potential for a redevelopment of the site.
Kimmo Virtanen, director of Scandinavia, Russia and the Baltic States for Christie & Co, said the arrival of StarCap could shake up the market, and introduce more international hotel brands, which remain under-represented in the region. It will also shine a light on the opportunities for repositioning to meet the market better.
“I’ve always said the market is a sleeping beauty – I’ve been trying to encourage investors for some time. We’re underpenetrated with brands.”
And Peter Haaber, founder of Danish limited service hotel brand Zleep, said of the move: “It’s brilliant – the more investors, the better.” He noted that both Accor and Marriott are looking to increase the presence of their brands in the region, with Starwood Capital’s arrival promising to improve their chances.
Stordalen’s Strawberry group has eleven affiliates, but hospitality is a major part of the combined business. It owns Nordic Choice, which operates 210 hotels in the Nordics and Baltics, with the majority of them in Sweden and Norway. Alongside portfolios under the Clarion, Comfort and Quality brands, the company also operates a good number of independent hotels.
Via Strawberry Properties, the group also holds hotels, with a current portfolio of 16 properties. In all, around 17,000 staff are reckoned to work through the hotel organisation.
In 2019, Strawberry teamed up with TDR Capital and Altor to rescue the Scandinavian business of Thomas Cook, Vinggruppen, as the company failed. That deal also included the acquisition of a dozen holiday hotels on Spanish islands. At the time, Stordalen commented: “I have said that I will not invest in hotels outside the Nordic and Baltic countries, but sometimes the temptation is too great. These are fantastic hotels that we want to be able to continue to offer Ving’s guests.”
Stordalen has spoken publicly about the impact of the pandemic on his businesses, and the need to cover his group’s debts. In mid 2020, Strawberry sold the Clarion Hotel Amaranten in Stockholm for SEK1.5bn to investor NREP, in the country’s largest hotel transaction for five years – though he commented at the time: “The property was not really for sale, but it is difficult to say no to a deal if the buyer is serious, capital strong and has a clear development plan for the building.”
More recently, he put one of his properties, Comfort Hotel Stavanger, into bankruptcy. That property, it is reported, struggled even in better times and over five years racked up losses of NOK12m.
Timothy Abram, vice president at Starwood Capital, said of the new deal: “We look forward to announcing our future plans for the hotel in due course. We are also very excited to explore future acquisitions together with Petter Stordalen given his unique hospitality track record in the Nordics.”
Stordalen added: “In a post-corona world, we see numerous possibilities together as the hospitality industry recovers. Maybe it is telling that our first move together will be one of the largest European hotel transactions of 2021.”
Christie’s Virtanen said the market is shaped by passive institutional investors who prefer lease agreements, content with a decent return; and a predominance of mid-market product. “There is a discrepancy. Revpars have been historically very good, and we have very little branded stock. Everyone is welcome to make their mark – they just haven’t bothered.”
He added that he is frequently called by investors, “but there is little actively on the market – maybe now is the time to shake the tree.” Virtanen reckons the region’s hotels are poised to bounce back strongly, thanks to a strong pre-Covid economic environment, a lower reliance on international arrivals, and lower levels of infection.
Elsewhere on the continent, Starwood Capital is moving towards a takeover of Austrian property group CA Immo, which is active across European office markets. And in late 2019, the investor acquired a residential rental portfolio in Finland, alongside local partner Avara Oy.
HA Perspective [by Chris Bown]: It feels like Scandinavia’s hotel markets are about to be shaken up – and that should benefit both investors, and visitors to the region. It has suited the funds that are passive owners of hotels, to work with mid-market local brands – but that has shut out international distribution, and probably also diminished inbound tourism numbers too, over the years.
Now, all of a sudden, Starwood Capital are likely to do the unthinkable. They’ll probably land a big brand for their new Copenhagen purchase – Edition, Waldorf Astoria, perhaps? – and be off tripping around the countryside with Stordalen’s help, looking for distressed properties to reposition. With big local branded operators such as Scandic looking in poor shape at the moment, what’s to say a landlord or two might be up for a chat?
For Stordalen, the link-up helps ease a cashflow situation which must have been far from comfortable, compounded by the unlucky timing of his acquisition of the former Thomas Cook assets in the region. Now, he’ll be able to look at opportunities afresh – and his new partners will surely be raking through his current portfolio, with a view to making repositioning moves, with financially fruitful rebrands.
The arrival of a new investor will also provide a spur for the other major landlord in the region, Pandox. Its CEO Anders Nissen has been looking forward to the opportunities arising from distress out of the pandemic. Now he has a new rival.