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French hotel company Accor is selling properties throughout Europe in a bid to reduce net debt, reduce earnings volatility and focus on hotel operations.
Having sold 30 of its UK properties in February 2007 to real estate company Land Securities for ”711m ($932m), Accor has now signed a deal with German real estate company Moor Park Real Estate, for the sale of 91 hotels throughout Germany and the Netherlands. The ”863m deal includes a ”43m renovation project that will be paid for by Moor Park.
Novotel, Mercure, Ibis and Etap properties are involved in the transaction, representing a total room number of 12,000. Accor will continue to operate the hotels under 12-year variable-rent leases, which are renewable for up to six times for a total of 84 years. The same arrangement applies for the UK properties, now owned by Land Securities. It too will invest in renovations for the properties, to the sum of ”53m.
Selling the properties in Germany, the Netherlands and the UK will free up cash for Accor, which can then potentially be invested in further developments through long-term partnerships with the two real estate companies. All insurance costs, property taxes and structural maintenance fees are now the responsibility of Land Securities and Moor Park.
Financially, the two deals will enable Accor to reduce its adjusted net debt by ”1.2bn ” ”584m through the UK transaction and ”612m through the latest deal with Moor Park. The sales will have no impact on earnings before interest, tax, depreciation and amortisation (EBITDA), although collectively they will accrue an extra ”12m to profit before tax.