Lifestyle Hospitality Capital (LHC) Group’s acquisition of a strong majority stake in The Dean Hotel Group was driven by the strength of the Dublin market and the platform’s potential for growth, LHC CEO Keith Evans said during an exclusive chat with Hospitality Investor, as he also revealed significant expansion plans over the next twelve months.
Dean Hotel Group acquisition
Founded earlier this year and chiefly made up of alumni from companies such as Starwood Capital and Ennismore, LHC’s strategy is focused on conversions within lifestyle hospitality and operational real estate, and Evans notes the acquisition of the Dean Hotel Group was a great combination of all the elements set forward in its investment strategy.
“We have a keen focus on getting involved with different hospitality platforms. With the Dean acquisition, we have a best-in-class hospitality operational real estate platform which is leading the way in Ireland, with the majority of their presence in the Dublin market which is a strong market with good fundamentals, very high occupancies and ADR,” he said.
He added: “And on top of that, there were a lot of significant value-add opportunities within the real estate portfolio. So for us, it was a really interesting way to invest in that real estate but also with the opportunity to scale up both the existing real estate platform as well as the management company.”
In terms of the evolution of the deal, Evans noted the acquisition was structured largely off-market and bespoke as others in the markets didn’t quite have the same vision that LHC did.
“The company was in the news a few times about potential transactions for subsets of assets but never in its entirety and never from a controlling shareholding base. So we actually bespoke-created a platform out of what the market saw as just a small portfolio of real estate assets, structuring a very different profile than what other people were considering, and then built an understanding and an alignment with the founder about how we could take the real estate portfolio and the company forward. There wasn't anyone else at the table having those discussions,” Evans said.
Plans for the future
Looking to the future, Evans outlines an ambitious urban strategy for LHC, with a focus on office conversions across the UK and Europe.
“The pipeline is predominantly conversion and upgrades of existing traditional underperforming hospitality assets, of which there are substantial across Europe. Office conversions are very active in the pipeline right now and these are in very core markets such as London, Paris, Madrid and Milan.
There's significant potential to scale up the UK footprint as well as the European footprint and that will be done both from a real estate perspective as well as from an asset-light management perspective,” he says.
He notes that significant enhancements are being carried out on eight freehold assets in Dublin, adding that 100 keys are being added to three of the eight assets - The Clarence Hotel, The Dean, and the Glasson Lakehouse - through extension works.
“This is a very significant increase on the operational inventory of those assets. The LHC development management team is already working with their interior design community and all the various stakeholders towards implementing those plans from Q1 next year,” Evans said.
Looking further afield, he says work is also being done to expand the LHC business into the US, with the expectation of an office being opened in the States in the first half of 2024.
“We're starting to see that there are a bit more transaction opportunities opening up in the US in the next six months relative to what we've seen in the last 12 months, and so it's important that that we build a position in that market. We think that the lifestyle hospitality space is very much a space that has a huge amount of growth in the US market. Europe and the US are the main focuses for LHC in the next 12 months.”
Resorts exploration and imminent concept launch
While LHC’s focus is currently urban, Evans says that an exploration of resorts is also on the horizon. He adds that LHC is also currently exploring a new concept which he expects to launch next year.
“The new concept is driven by what we're seeing from a real estate opportunity perspective - so there's a propco element to the strategy - and it's also driven by what we think is missing in the lifestyle space from a consumer perspective.”
Moving forward, Evans notes the fragmented nature of the European hospitality market presents significant opportunities for growth and development.
“There aren’t very many consolidated players in the European landscape and I think we have the opportunity to be a relevant voice in that space. The Dean Group has an incredible set of brands, concepts and capabilities which I think will resonate both with the existing stakeholders in terms of future deployment of capital but as well as with other institutional professional investors in the hospitality space across Europe.
We're entering into an interesting phase of the investment cycle. So from that perspective, I think there will be a lot of opportunities going forward. We look forward to building the business over the next few years, launching discretionary funds series, scaling up our activities across Europe and then to the US. And we'll see where we go from there.”