London-based private equity real estate firm Benson Elliot and asset manager Schroders fell in love with the magic of a Disneyland Paris hotel portfolio in September – sealed with a $129.7 million deal with Austrian real estate developers and owners UBM and Warimpex to buy it.

The portfolio features two four-star hotels, The Vienna House Dream Castle and The Vienna House Magic Circus, which were bought via 50-50 joint ventures between Benson Elliot, investing for its Fund V, and Schroder Real Estate Hotels, which represented a group of private investors. The hotels already generate strong cashflow and were acquired at a substantial discount to replacement cost, according to Benson Elliot principal Marc-Olivier Assouline. As Disneyland Paris rolls out its €2 billion expansion plan starting in 2021, these assets are well positioned to benefit, according to the firm.

The Dream Castle and Magic Circus hotels opened their doors to the public in 2004 and 2007, respectively. Built in the city of love, the two hotels have been a rather dreamy investment. UBM chief executive Karl Bier previously told the media that the Magic Circus and Dream Castle hotels have remained profitable, even in the midst of the global financial crisis, during which many real estate values fell. As of May 2018, both hotels reported a 70 percent occupancy rate, according to Warimpex equity research published by financial consultancy Vestor Dom Maklerski. The Dream Castle and Magic Circus hotels brought in an estimated annual net operating income of €1.8 million and €1.4 million, respectively, according to the analysis.

Disneyland Paris, formerly named the Euro Disney Resort, opened in 1992 and is the largest Disney resort outside of the US. Located just east of the center of Paris, it has become the most visited theme park in Europe with more than 320 million visitors within 25 years of opening. The Dream Castle and Magic Circus are two of the six partner hotels located on the premises.

Dream Castle, which features architecture and décor inspired by European castles, offers free shuttle services to the Disneyland Paris parks, a themed restaurant and hotel bar. Magic Circus, built with a view of a lake and gardens, includes amenities like conference space and an indoor pool.

Attacks and a delay

While the hotels fit right into the Disneyland kingdom with decorative suits of armor in the lobby and statues of prancing ponies, these assets have not always performed in harmony with the park.

In 2015, the city of Paris experienced a series of terrorist attacks. During this time, suicide bombers attacked the national stadium, Stade de France, in the suburb of Saint-Denis, and gunmen committed a series of mass shootings at restaurants and cafés nearby. The violence killed 130 people, and France declared a three-month state of emergency.

Though the resorts are outside of the city center, they closed for four days in an unprecedented move. Disney’s Enchanted Christmas press event, which was scheduled for that weekend, was canceled that year.

The attacks created a financial challenge for owners Warimpex and UBM. The two firms had put the two Disneyland Paris hotels up for sale that year, but the tragic events discouraged investors, according to Andreas Zangenfeind, UBM’s head of transactions. The sale was subsequently put on hold as a result.

The hotel assets still earned their happily ever after though – albeit four years later. Dream Castle and neighboring Magic Circus maintained their beauty and managed to attract Benson Elliot and Schroders as new owners. And so, if these walls could talk, they would tell you that this sale goes to prove they have always been the fairest hotels of them all.