Bucharest Property Acquisition Advice & Business Review

Project Type

Financial Advisory

Country

Romania

Case Study Title

Bucharest Property Acquisition Advice & Business Review

The Client

A European property investment fund with offices in London and Vienna.

Background

The Client, was in exclusive negotiations on the purchase of a large hospitality complex in downtown Bucharest, Romania. The asset comprises 9 buildings totalling 86,000 sq. m. with two large branded hotels totalling 763 rooms, a block of unbranded serviced apartments, a large health academy, casino, spa and parking.

Client Need

In order to confirm finance for the acquisition the Client needed a business review and advice on whether the strategy and capital expenditure plan they had prepared to upgrade and re-position the complex was realistic and would enhance the value of the asset.

Scope of Work

Hotel Solutions Partnership (‘HSP’) assigned a team of 3 consultants to analyze the extensive documents shared by the Client in a data room. These comprised vendor information, a valuation prepared by an international property firm, redevelopment plans and financial projections prepared by the Client.

The HSP lead consultant, Greg Place, travelled to Bucharest and over the course of 2.5 days, reviewed the hotel complex and evaluated the market environment.  He interviewed the incumbent management team and visited both the existing competitor hotels and the hotels under construction. Greg reported his observations and analysis to the Client’s investment officer.

Within 3 days of Greg’s visit, the HSP team delivered the following :

1. Analysis of risks involved in the hotels’ current business segmentation

Commentary on current business segmentation and identification of risks involved in pursuing the current hotel customer mix.

2. Alternative scenario to mitigate risks

Alternative markets / ways to decrease reliance on one predominant customer base.

3. Hotel Performance

• Observations on the historical performance relative to competition..
• Assessment of potential future growth of both revenues and costs including ADR, Occupancy, RevPAR.
• Evaluation of the main commercial and operational assumptions of the future cash flows for both hotels and advice on whether they were realistic.

4. Market positioning

Commentary on the hotels’ market positioning vis-a-vis competition, and potential scenarios for improvement.

5. Potential to add value

• Recommendations on ways to increase the value for the hotels via efficient usage of spaces, re-organising people & processes, targeting cost efficiencies and operational improvements.
• Feedback on the plans for rooms reconfiguration and additional capacity.

6. Capex budget

Commentary on the itemised budget for planned renovation of the properties (from a market perspective and in order for the hotels to remain competitive).

7. Market value

Assessment of the forecasted market value of the hotels in relation to other recent deals in the market.

8. SWOT

Strengths, Weaknesses, Opportunities and Threats analysis of the current business and the Client’s plans for the future

Following the submission of HSP’s report, Greg Place travelled to Amsterdam to attend an all-day meeting with the Client’s investment team and financing partners.

What did Hotel Solutions Partnership achieve for the client?  

Within a short period of time, we provided an independent opinion of the performance and capabilities of the hotels’ incumbent management, challenged assumptions on future performance and advised on the renovation programme’s likely impact on value. We helped the Client to develop a robust plan to improve profit margins and bring the hotels’ management processes in line with industry best practice.

HSP’s recommendations enabled the Client to secure credit-committee approval and confirm funding from financing partners. The acquisition was successfully finalised within 30 days of the Hotel Solutions Partnership’s involvement.