Dalata, the largest hotel operator in the country through its ownership of the Maldron and Clayton brands, had been linked with the high-profile hotel, which was placed on the market with a €30m price tag in July.
The amount being spent is a record for the Cork hotel market. At the publication of Dalata’s half-year financial results last month, group chief executive Pat McCann said that, as part of the company’s expansion plans, all hotel acquisition opportunities in Ireland’s main urban areas would be considered, including the four-star, 191-room Clarion.
Yesterday, he said: “The Clarion is a superb quality hotel, finished to a very high specification and one of the finest, if not the finest, hotel in Cork City. The asset generates a high quality and secure rental income stream, underpinned by a highly profitable hotel operation.”
The Clarion is set to continue to be operated by the Choice Hotel Group (it was developed by Howard Holdings in 2005 before going into Nama), under the terms of a 35-year leasehold agreement. The current annual rent, which will be paid to Dalata, will be just over €2.4m, subject to upward-only rent reviews at five-year intervals.
Dalata recently raised gross proceeds of €160m via a share issue, and is set to add up to another €90m in a debt raise to give it about €250m to spend on expansion.
These plans will cover acquiring existing hotels, the extension/refurbishment of existing hotels in its portfolio, and the building of new hotels. It has been suggested that the group could look to build up to seven hotels around the Dublin area.
At last month’s results announcement, management said it was in talks relating to “a number of sites” and hoped to buy within five months and build over the following two or three years.
Regarding the Clarion deal, Davy Stockbrokers’ Flor O’Donoghue said: “The investment will generate an initial return on investment of 6.9%, with upward rent reviews every five years. As Ireland’s leading hotel operator, Dalata remains very well positioned to benefit from what are highly favourable trading conditions across the country.”
Kevin McDermott, of Goodbody Stockbrokers, suggested that while it is not a surprise to see Dalata bid for prime assets such as the Clarion, he would expect the majority of the deals it is likely to do to result in it actually operating the hotels.
He added that Goodbody estimates the Clarion acquisition to add 3% to Dalata financial year 2016 earnings forecasts.