Hostel business generates €450m for Patron
Queensgate Investments has entered exclusive talks to buy Generator, Patron Capital’s upmarket hostels business, for €450m (£384m).
The agreement means that around €700m of European hostel assets are likely to change hands this month as investors look to take advantage of the strong cash flows and defensive nature of the sector amid an uncertain investment environment.
The 14-asset portfolio includes hostels in Tavistock Place, WC1, as well as Stockholm, Dublin, Paris, Barcelona, Rome, Amsterdam, Hamburg, Copenhagen, Berlin and two development sites in Madrid and Miami. All but two are held freehold.
Queensgate Investments has entered exclusive talks to buy Generator, Patron Capital’s upmarket hostels business, for €450m (£384m).
The agreement means that around €700m of European hostel assets are likely to change hands this month as investors look to take advantage of the strong cash flows and defensive nature of the sector amid an uncertain investment environment.
The 14-asset portfolio includes hostels in Tavistock Place, WC1, as well as Stockholm, Dublin, Paris, Barcelona, Rome, Amsterdam, Hamburg, Copenhagen, Berlin and two development sites in Madrid and Miami. All but two are held freehold.
Queensgate is led by chief executive Jason Kow, former head of special situation investment at London & Regional, and backed by private wealth partnership LJ Partnership. LJ manages investments for around 200 families globally, including Hong Kong’s Peterson Group, which owns 20% of LJ and invests in Queensgate’s funds.
Patron first bought into Generator in 2007 through its third fund, when it had only two sites, and its investment is understood to have provided a healthy return. Invesco is a minority owner.
Patron is selling assets from the €868m fund it raised in 2007, including an interest in CALA Homes, which Chinese developer Evergrande Group is in talks to buy for £700m.
Queensgate fought off strong competition from Brookfield for Generator.
TPG also bid, and this week completed the purchase of hostel business A&O Hotels and Hostels from its founders for around €250m. The business owns and leases 31 assets totalling more than 20,000 bedrooms across Germany.
Lazard is advising on the sale of Generator; Queensgate is unrepresented.
Hostels: what’s the attraction?
The immature hostel market is perceived by investors to be on the brink of a growth spurt comparable with the emergence of the budget airlines industry in the early 2000s.
Both Queensgate and TPG will have the opportunity to further establish a trusted and recognisable brand using design and communal areas with both Generator and A&O.
Will Duffey, executive vice president in JLL’s hotels and hospitality group, said: “[The activity is] a reflection of a wider trend for travellers to want a diverse range of options when it comes to travel accommodation. More than half of the 18,000 hotel rooms that have opened in London since 2012 have been in the budget sector.
“Demographics play a key role in this. Younger travellers are looking for branded and experiential accommodation but without the price tag.”
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