Fattal raising more funds to capture opportunities in Europe

Fattal Hotels has completed a €315 million (US$341.22 million) fund raise for the purchase of hotels in Europe, according to Ronen Nissenbaum, incoming CEO of Tel Aviv-based Fattal Hotels for the United Kingdom, Ireland, Benelux and Spain. Any future hotels purchased from this fund will be managed by the Fattal and its brands such as Leonardo, Herods and NYX.
Nissenbaum told HOTELS that Menora Mivtachim and Harel Insurance will each take €100 million (US$108.32 million) positions in the fund, Leumi Partners will invest €15 million (US$16.24 million) and Fattal Properties (Europe) Ltd. will invest the remaining €100 million.

Following interest and inquiries from other financial institutions, the venture may grow to approximately €400 million (US$433.3 million), Nissenbaum said. The funds will constitute the initial capital for the purchase of hotels in Europe totaling future purchases and investments of more than €1 billion (US$1.08 billion), he added.

Two recent purchases by Fattal Europe in Spain (Malaga and Mallorca) with a total of 260 rooms at an approximate cost of €40 million (US$43.33 million) will transfer to the fund.

Just earlier this week, HOTELS reported that Jurys Inn, the Irish hotel chain across Ireland and the U.K., will be rebranded as Leonardo hotels later this year as part of a wider expansion plan, which could also include new hotels coming up in Dublin, Cork and Galway. All 35 hotels in the portfolio were acquired in 2017 by the Fattal Hotel Group, owned by Israeli entrepreneur David Fattal. The Jurys brand has operated under the Fattal group’s umbrella, along with its Leonardo, Royal and Nyx properties.

Bar at a Leonardo hotel in Europe

Currently, there are 145 Leonardo properties across 13 countries, including 16 in Ireland and the U.K. The company said the rebranding will enable guests to access benefits like international loyalty program and allow employees to work overseas within the group.

In mid-March Fattal Hotels sold two of its hotels in Munich: the 98-room Leonardo Hotel Munich City West and the 270-room Leonardo Hotel & Residence Munich for a combined sale price of €77 million (US$92 million) which comes to €209,000 per room (US$250,000). In addition, Fattal’s management company in Germany, Sunflower Management GmbH & Co., signed a lease agreement with the buyers for 25 years for €2.52 million (US$3 million) annually for Leonardo Hotel & Residence Munich and €0.93 million (US$1.1 million) for Leonardo Hotel Munich City West. Both properties will undergo renovations, with €4 million (US$4.7 million) of the sale price set to be spent on refurbishments.

“The pandemic created opportunities in Europe for the purchase of hotel properties at attractive prices,” said Fattal Group Director and CFO Shahar Aka. “To this end, we decided to raise the money together with leading partners in the world of finance in Israel, who saw our extensive knowledge and reputation in the field as an opportunity that is expected to bring them a return on their investment.”

Aka added that Fattal’s management has been exposed in recent months to many opportunities on the continent. “We estimate that additional opportunities will be created in 2022 by hotel owners who will have to refinance loans previously taken from banks and may run into a financing challenge,” he added. “The purpose of the project is to yield a return for investors, similar to what was achieved with the Fattal Group in the previous fund.”

The capital of the subsidiary, which owns over 50 properties in Europe, was about €185 million (US$200.4 million) when the bonds were first issued (Series A) In 2016 and as of the end of 2021, the capital stood at about €356 million (US$385.63 million), which reflects an increase in value of about 120%, without additional cash flow to the subsidiary from the owners and after withdrawing a dividend of €49 million (US$53.07 million) during 2021.

“We have proven that we know how to improve the assets we have in Israel and abroad, increase revenues and create increased value for our hotel assets.” – Ronen Nissenbaum

Nissenbaum added that Fattal hotels is now considered one of the most prominent operators in Europe and the largest in Germany. “We have proven that we know how to improve the assets we have in Israel and abroad, increase revenues and create increased value for our hotel assets,” Nissenbaum said.

This is not the first venture that the Fattal Group has set up with capital partners, according to Nissenbaum. In 2007 during the financial crisis set off by Lehman Brothers default, Fattal established a hotel fund with Menora Mivtachim, Migdal Insurance, Amitim, Delek Group and Liberty Properties to purchase hotels. Fattal, which was the fund’s largest investor, purchased 18 hotels in Europe over the years, and when the fund reached its end in 2014, Fattal acquired the hotels from its partners at a cumulative value of about €160 million.

In addition, in July 2021, Fattal acquired 50% of a property company which owns four hotels (including approximately 1,350 rooms) in central London. Under the deal, Fattal transferred £52 million (US$67.82 million) to the property company capital for the partial repayment of the loans and capital investments, Nissenbaum said. Fattal acquired 50% of the property company in exchange for a discount it received on rent for the next three years. Leumi Partners and Deloitte assisted in formulating the deal and its economic outline.

Fattal Hotels, owned by the Fattal family (62.33%), was established by David Fattal in March 1998 and specializes in owned, operated, leased and managed hotels in Israel and Europe. The network currently consists of approximately 45,000 rooms in 230 hotels (including hotels under construction) in 19 countries. The company operates under the Leonardo, Herods and NYX brands.

Fattal has 173 hotels in Europe (including hotels under construction) with the largest concentration in Germany, where it owns 71 hotels. In the U.K. (including Ireland), Fattal is considered the second largest hotel company with some 52 hotels.