Zeus Private Equity checks in with £50m hotel deal

Manchester based Zeus Private Equity (ZPE) has made its first investment from its maiden fund, providing equity funding to a new company set up to carry out a buy and build strategy in the UK regional hotel sector.

The strategy is based upon acquiring underperforming 3 star hotels and converting them into 4 star hotels through a combination of operational improvement and refurbishment. The management team is led by Arnold Schnegg, a highly experienced hotelier who successfully implemented a similar strategy as part of the management team at Paramount Hotels and Q Hotels. Joining Arnold are James Hawksworth, former Finance Director at Paramount Hotels and Jonathan Lea, formerly of Metropole Hotels, who joins as Chairman. Both Gary Tipper and Ed Fazakerley from ZPE will also join the Board. The team was introduced to ZPE on an exclusive basis by one of the private investors in their fund.

The first addition to the portfolio is The Belfry House Hotel in Handforth, near Manchester Airport. The hotel has 81 bedrooms and a major refurbishment will commence in early 2008. The acquisition of at least three further hotels is expected to follow in early 2008.

A total funding package of more than £50 million will be raised to complete the buy and build strategy, with equity being provided jointly by ZPE and Hermes Private Equity. Senior debt facilities will be provided by Allied Irish Bank in Manchester.

Commenting on the deal, Gary Tipper, Managing Partner of Zeus Private Equity, said: "We have been working on this deal with Arnold and the team for almost twelve months and have been highly impressed with the drive and commitment they have shown. The UK’s regional hotel market has performed consistently well over the past five years and the team has proved that the strategy they are following has been successful."

ZPE was advised on the deal by Rebecca Grisewood, Mark Dawson and Lucy Valerio of Halliwells, with financial due diligence carried out by Matt Copley and Stephen Green at BDO Stoy Hayward.

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