ADIA eyes £620m UK return

The preeminent sovereign wealth fund of the United Arab Emirates is in talks to make its first real estate investment in the UK since 2007 with the purchase of a distressed hotel portfolio for a reported £620 million.

The Abu Dhabi Investment Authority (ADIA), the main sovereign wealth fund of the United Arab Emirates, is in the running to buy a portfolio of 42 hotels currently subject to distressed circumstances in a deal valued at about £620 million (€792.7 million; $972.9 million).

The portfolio of hotels, operated by global hotelier Marriott International, are currently in administration. Advisors Ernst & Young, Jones Lang LaSalle and Hawkpoint have been working with lender RBS to find a buyer after last year the bank enforced on a £700 million loan to previous owners Quinlan Private, the former Irish private equity real estate group, and Israeli investors Delek Real Estate and Igal Ahouvi. They bought the properties in 2006 in the lead-up to the start of the global financial crisis.

At the point of RBS enforcing on its loan, CoStar, a UK property news service, noted the assets were valued at almost £1 billion. Since then private equity firms including TPG Capital are understood to have been circling as RBS appointed E&Y, JLL and Hawkpoint to begin a sale process at the start of the year.

ADIA is understood to have shown early interest in the portfolio however a bid of more than £700 million from Blue Coast Hotels, an Indian hotel group, had put the portfolio into exclusive negotiations only for that bid to collapse months later. Subsequently, ADIA has been able to re-enter the process with a bid of its own although PERE understands the sovereign investor is not yet itself in exclusivity on the deal. Nonetheless, Property Week, the UK property magazine, reported a deal could be completed by the end of September.

Should a deal conclude, it would represent a return to the UK for ADIA – one of the world’s largest sovereign wealth funds with an estimated $627 billion of assets according to the Sovereign Wealth Fund Institute – to following a five year hiatus. Its previous direct capital outlay in the UK came in July 2007 with a participation in the acquisition of London office Devonshire Square for £425 million. It was sold to Blackstone earlier this year for £330 million.

ADIA declined to comment when approached.