A Middle East private investment group has agreed to buy a luxury London hotel from InterContinental Hotels Group (IHG) for $457m.
IHG said in a statement that it has agreed to sell the InterContinental London Park Lane to Constellation Hotel (Opco) UK, which is an affiliate of Middle East-based Constellation Hotels Holding Limited.
IHG said its leasehold interest in the hotel has been sold for gross cash proceeds of £301.5m ($457m), 62 percent above the net book value as of end of 2012.
IHG added that it has secured a 30-year management contract on the hotel, with three ten-year extension rights at IHG’s discretion. Management fees are expected to be about $6m per annum.
The hotel, which was opened in 1975 as a purpose built InterContinental and has been wholly owned by IHG since 1999, generated revenues of $89m in 2012.
IHG said the transaction is expected to complete in the second quarter of 2013 with the proceeds used for general corporate purposes.
IHG indicated in November that the hotel would be the next major asset considered for sale. Since becoming a standalone company in April 2003, IHG has sold 191 hotels for proceeds of $6.1bn.
Richard Solomons, chief executive of IHG, said: “The transaction we have announced today to sell InterContinental London Park Lane highlights the value of our asset portfolio and the attractiveness of InterContinental as one of the world’s leading luxury hotel brands.
"It is another step in our long standing commitment to reduce the capital intensity of IHG. We are very pleased to be working closely with Constellation Hotels, a respected hotel investor, who will be a great partner and with whom we look forward to building a long term relationship.”
London’s luxury-hotel market has been defying Europe’s sovereign debt crisis and Britain’s struggle for economic growth as wealthy overseas visitors drive record sales and occupancy rates, boosting values.
In February, Constellation Hotels Holdings bought four hotels in France — Concorde Lafayette, Hotel du Louvre, Martinez and Palais de la Mediterranee — from Starwood Capital Group's Groupe Du Louvre affiliate.
IHG said earlier this year that it has identified Saudi Arabia and the UAE as two markets representing the most opportunity for its Middle East business to grow in 2013.
Eight hotels are signed and scheduled to open in Saudi Arabia by 2018, IHG India, Middle East and Africa COO Pascal Gauvin said.