Pyramid-Hamilton merger enables European expansion
Pyramid-Hamilton merger enables European expansion
07 FEBRUARY 2020 9:26 AM

Since setting up its European HQ in 2017, Boston’s Pyramid Hotel Group had been searching for a European partner with which to share best practices and gain further access to capital markets.

LONDON—Hamilton Hotel Partners, based in London, and Pyramid Hotel Group, based in Boston, are now one company with a combined hotel count of 141 assets with more than 32,000 rooms and a value under management of £5.3 billion ($6.8 billion), sources have announced.

According to a news release from Hamilton, the combined company has acquired £1.5 billion in value in acquisitions over the last three years.

Pyramid operates 90 of that count. Hamilton—now officially titled Hamilton Hotel Partners, a Pyramid Hotel Group Company—operates and manages the rest.

The two firms’ brand identities will remain intact, at least for now, sources said.

Pyramid describes itself as brand-agnostic, managing hotels that are independent as well as branded (under such flags as Hilton, Hyatt Hotels Corporation, InterContinental Hotels Group, Marriott International and Radisson Hotels Group). The firm opened a European headquarters in 2015, in Dublin.

Warren Fields, CEO of Pyramid Hotel Group, said the deal represents the perfect scenario for the company’s next chapter, which includes expansion across Europe.

“First of all, Frank Croston (Hamilton’s CEO) and his team are super guys, personally and professionally. They have a fantastic reputation, know the business and have a roster of blue-chip clients similar to what we have here in the U.S.

“Partnering with them allows us to get into all of Western Europe, besides the U.K. and Ireland platform where we have established ourselves,” Fields said.

To Hamilton, Pyramid brings expertise from the U.S., he said.

Hamilton has “done a really good job, but they do not have the scale from the management side of things, while, quite frankly, we can benefit tremendously from the expertise they bring from the asset-management side of the equation,” he said.

“And both sides have shown they have access to quality capital sources. We’re very excited about the growth opportunities,” Fields added.

European moves
Upon opening its Dublin office, Pyramid’s European portfolio consisted of the 132-key Temple Bar Hotel, Dublin; 117-key Pendulum Hotel & Manchester Conference Centre; and 378-room DoubleTree by Hilton Hotel London Docklands Riverside.

Today, only the Dublin hotel remains from that trio, although it has since been joined by the independent 165-room Carton House Hotel & Gold Resort in Maynooth, Ireland, where a restoration is set to be finished in May.

The merger will speed up European growth as both companies share and act upon best practices, knowledge and relationships, the CEOs said.

Founded in 2004, Hamilton is an investment, management and advisory firm that has most of its management responsibilities in the U.K. but also has a notable portfolio in Continental Europe—France, Germany, The Netherlands and Belgium.

Croston, co-founder and owner of Hamilton, said the deal is aimed to help Pyramid build a platform in Europe similar to what it has done in the U.S. Before founding Hamilton, he served as area president for the U.K. and Ireland at InterContinental Hotels Group.

“Pyramid has seen strong investor appetite from the U.S. looking at yields in Europe, and in the 16 years since we were founded, we have sown and harvested over that period,” Croston said.

He added that in Hamilton’s early days, before the Great Recession, it invested in Spain and Eastern Europe, markets it is not in today but will look at again.

Croston said Pyramid’s focus, despite its European office, has been on the U.S., but with Hamilton’s knowledge of Europe’s multiculturalism and employment and legislative landscape, that will change.

That change will be driven “in particular, from its leverage and existing relationship with a huge number of U.S. investors who have worked with Pyramid in the U.S. and are keen to do so in Europe,” he said.

The merger will allow Pyramid and Hamilton to look outside of Western Europe, he said.

“Investor appetite for Eastern and Southern Europe definitely was muted after the crash, but now there is real interest in Spain, Portugal, Italy and Greece, in particular,” he said.

The wide range of capital and appetite Pyramid and Hamilton have on both sides of the Atlantic will allow the merged entity to take advantage of current dynamics, Croston said.

“In Europe, the yield arbitrage varies from north to south, east to west, with investors positioning differently on the risk-reward curve. Not all investors will behave the same. Some will have a gateway-only strategy, while some will look at smaller markets,” he said.

Shift in appetite
Croston said he expects over the next 10 years institutional investment in the hotel sector will become increasingly evident in Europe.

“That is far more common in North America than here. That investment in Europe has a level of comfort it needs, which is sustainable, predictable returns, so firms yield and move more into other real asset classes, but we are seeing an early-stage movement to institutional investors happy to take on what has been perceived as marketing and management risk and directly owning the asset. This will be good for the sector,” he said.

Hamilton grew its hotel portfolio in Belgium via an acquisition of nine hotels across several brands from Centerbridge Partners in April 2019.

Croston said the Ramada-brand assets in that deal have now been rebranded under Accor’s Mercure.

“The merger will emphasize this type of deal, portfolios, rather than single assets,” he added.

Hamilton’s one asset in Germany is a resort, and Fields said the merger would not shy away from further investing there, although that country’s domination by leases complicates things.

“Germany is interesting, but a lot of our clients are private equity-driven, and leases do not fit well with their investment models. Pyramid has done deals with (Germany’s) Union Investment, and Pyramid-Hamilton will be very happy by leases, but again these things are driven largely by our clients,” Croston said.

The merger is very much a partnership, Fields said.

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