Since buying B&B Hotels three years ago, PAI Partners has grown the hospitality company from a local French player to an integrated hotel platform operating across 12 European countries and into Latin America with about 486 properties and nearly 43,000 guestrooms. Now the Paris-based private equity firm is ready to sell the budget hotel chain to Goldman Sachs, marking its fourth recent disposition from its PAI Europe VI fund.
If the sale to Goldman Sachs Merchant Banking Division meets various approvals, it is expected to close in the second half of 2019. While PAI confirmed the exclusion negotiations with Goldman Sachs this week, neither firm disclosed financial details. But the Financial Times is estimating it could be worth €1.9 billion, or $2.1 billion. When PAI acquired B&B Hotels in March 2016, it was valued at €790 million, or $882 million.
Since it opened its first hotels in France in 1990, the budget hotel chain has grown, particularly after the acquisition by PAI, which accelerated international expansion. The chain now has hotels in 12 European countries including Austria, Switzerland, Belgium, Portugal and Slovenia, and has also opened in Brazil. Under PAI’s ownership, B&B averaged one opening per week. The European private equity firm also invested heavily in refurbishing existing properties, resulting in PAI almost doubling EBITDA since acquiring B&B.
If approved, the transaction would mark the fourth exit from the PAI Europe VI fund. Previous exits include the sale of Domus VI, a leading player in the European nursing home sector, and Konecta, a leading provider of outsourced contact centers and business process outsourcing services in Spain and Latin America.
Busy European hospitality market
The planned sale of B&B comes as deals for European hotels increased 52 percent in the last 12 months, according to data compiled by Bloomberg. A first-quarter 2019 report about the European hotel investment market from CBRE also noted strong rate of investment for Europe’s hotel sector over the same period. Investment volumes totaled €23 billion, or about $25.7 billion, according to the brokerage firm. Activity in the U.K., Spain and Germany, as well as the demand for alternative investments and operational real estate, helped drive the high investment volumes. The U.K., for example, had €8.2 billion—approximately $9.2 billion—in hotel transactions during the 12 months ending the first quarter of 2019, a 15.1 percent increase.
Goldman Sachs investment deals
Goldman Sachs Merchant Banking Division, the bank’s investment arm, is one of the biggest in the world with $20 billion in private equity investments made at the end of 2018, according to Bloomberg. The merchant banking division has been active in the U.S. real estate market in recent months.
In May, a Goldman Sachs venture with Lincoln Property Co. acquired Field Office, a 304,500-square-foot creative office campus in Portland, for $118 million from developers Project^ and National Real Estate Advisors LLC.
In April, the merchant banking division formed a joint venture with MRP Realty to recapitalize a four-building portfolio in Philadelphia. The amount was not released but the portfolio consists of three Class A office properties, one of which includes a parking garage: 400 Market St. (181,587 square feet), 325 Chestnut St. (206,816 square feet) and The Bourse (305,922 square feet), along with The Bourse Garage (453 parking spaces). The most recent loan on the portfolio was for $114.2 million in April 2018 from Aareal Bank, according to Yardi Matrix.