Headline V Hotel Investment Breakfast Briefing Deloitte Ireland, Debt and Capital Advisory Thursday, February 1 st 2018

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1 Headline V Hotel Investment Breakfast Briefing Deloitte Ireland, Debt and Capital Advisory Thursday, February 1 st 2018

6 Debt & Capital Advisory How our Clients are reacting to the current environment Improved T&C s De-Risk Term/Covenants/ Banks Borrower Cash Release Diversify Club/New Markets Direct Lenders Growth Capital 2018 Deloitte. All rights reserved Hotel Investment Breakfast Briefing

8 Investment & Development Debt Markets Funding in the Irish Hotel Market Contents A. What We Are Advising Hotel Clients On B. Debt Strategies and Structures our Hotel Clients Are Using C. Who Are The Active Funders & What They Focus On 2018 Deloitte. All rights reserved 8

10 B. What We Are Advising Hotel Clients On What debt strategies are available in the market EV/EBITDA Unlevered Leveraged Unitranche Senior/Mezzanine 14x 12x 10x 8x Mezzanine 6x 4x 2x Up to 5x Senior debt 5x-7x Senior debt Up to 8.5x Unitranche Senior debt up to 7x 0x Senior debt (Bank) Unitranche Note: the structures and pricing presented are indicative and only for illustrative purposes Mezzanine Equity 2018 Deloitte. All rights reserved 10

11 B. Structures Our Hotel Clients Are Using SPV Group/Sub-Group Group Hotel SPV Hotel SPV Hotel SPV Hotel Group Equity Transfer JV / Development Company Hotel Group Debt Funder Debt Funder Debt Funder Hotel SPV Hotel SPV Hotel SPV Hotel SPV Hotel SPV Hotel SPV Hotel SPV Hotel SPV Debt Funder Debt Funder Debt Funder Debt Funder Debt Funder Debt Funder Debt Funder 2018 Deloitte. All rights reserved 11

15 Dublin Hotel Market Stepping into the Global Spotlight Deloitte Hotel Investment Breakfast Briefing, 1 st February 2018 Dave Murray, CBRE

16 AGENDA 1. Hotel Market Performance 2. Transactional Environment 3. Supply and Demand Dynamics 4. Emerging Deal Structures DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 16 2

17 Irish Hotel Performance 01

18 HOTEL PERFORMANCE - IRELAND Irish Hotels ADR, RevPAR & Occupancy 2012 to % 75% 71% % 70% 80 64% 66% 65% 60 60% % % ADR RevPAR Occupancy 6.5k Profit PAR 7.3k Profit PAR 9.2k Profit PAR 12.0k Profit PAR 14.6k Profit PAR Source: Crowe Horwath DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 18

19 HOTEL PERFORMANCE - DUBLIN Dublin Hotels ADR, RevPAR & Occupancy 2012 to % 84% 83% 85% % 81% % 80% % % ADR RevPAR Occupancy % 10.0k Profit PAR 11.4k Profit PAR 13.8k Profit PAR 16.9k Profit PAR 20.5k Profit PAR Sources: HotStats, Crowe Horwath DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 19

20 DUBLIN HOTELS ON A EUROPEAN STAGE Average Daily Room Rate , 2017F and 2018F Geneva Zurich Paris London Rome Barcelona Milan Amsterdam Dublin Frankfurt Lisbon Vienna Madrid Berlin Porto Prague Budapest F 2018 F Source: HotStats DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 20

21 Hotel Investment Market 02

22 Transaction volume in Number of Hotels Traded IRELAND TRANSACTION VOLUMES 1,200,000, ,000,000, ,000, ,000, ,000, ,000, Volume No. of Transactions Source: CBRE Hotels Research DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 22

23 Price per Key (EUR '000s) DUBLIN YIELDS & PRICE PER KEY EVOLUTION % % % 6.50% Dublin City Yields % % The Morrison Burlington Hotel Trinity Capital The Spencer Price per Key ( '000s) Temple Bar Hotel Gresham Hotel Dublin Yields Burlington Hotel Dublin Lifestyle Collection Temple Bar Hotel Source: CBRE Hotels Research DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 23 23

24 YIELDS IN A EUROPEAN CONTEXT 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 5.00% 4.50% 4.00% Q year high 3-year low Source: CBRE Hotels Research DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 24

25 Supply Changes 03

26 TWO YEARS AGO BRANDS CONSIDERING DUBLIN: DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 26

27 NEWNOW CONFIRMED DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 27

28 DUBLIN NEEDS AN ADDITIONAL 5,000 ROOMS Failte Ireland, June 2016 WHERE ARE WE NOW...? DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 28

29 DUBLIN DEVELOPMENT PIPELINE 8,000 7,000 6,000 Year End Rooms on site by Y/E , % , % Cumulative growth over current supply % 5,000 TOTAL 7, % 4,000 Year End Rooms opening Cumulative growth over current supply 3, ,444 +7% ,403 +7% 2, , % , % 1, % TOTAL 7, % Bedrooms On Site Bedrooms Opening Source: CBRE Hotels Research DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 29

DUBLIN NEW SUPPLY BY LOCATION Airport Total Extensions 455 AIRPORT New Builds 421 876 total new bedrooms DUBLIN SECONDARY Extensions 105 New Builds 1,561 DUBLIN CITY CENTRE Extensions 734 New Build

30 DUBLIN NEW SUPPLY BY LOCATION Airport Total Extensions 455 AIRPORT New Builds total new bedrooms DUBLIN SECONDARY Extensions 105 New Builds 1,561 DUBLIN CITY CENTRE Extensions 734 New Build 3,576 Dublin City Centre Total 4,310 total new bedrooms Dublin Secondary 1,666 total new bedrooms Geographic Terminology Airport: County Fingal Area Dublin City Centre : Dublin1, 2 & 4 Dublin Secondary: Other Dublin City Council Area Source: CBRE Hotels DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 30

31 HOWEVER It looks like there will be enough future demand to absorb this number of additional bedrooms DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 31

GLOBAL DRIVERS Domestic vs Overseas Visitor Numbers 2016 Heavily dependent on

Overseas Visitor Spend 2016 25% Market Share of total spend 39% Market Share of total

3% GDP Growth 2018 2.3% GDP Growth 2018 (Eurozone) 1.

32 GLOBAL DRIVERS Domestic vs Overseas Visitor Numbers 2016 Heavily dependent on overseas visitors and their economies Domestic Visitors Overseas Visitors Domestic vs Overseas Visitor Spend % Market Share of total spend 39% Market Share of total spend 19% Market Share of total spend Domestic Spend Overseas Spend 2.3% GDP Growth % GDP Growth 2018 (Eurozone) 1.4% GDP Growth 2018 Sources: Failte Ireland, ITIC, PwC, Oxford Economics, Trading Economics DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 32

33 DOMESTIC DRIVERS Full employment to be reached this year +12% Total population growth by % Working population growth by 2030 Urban population increasing from 63.8% to 67.8% by 2030 >300k Square metres of office takeup in 2017 Office take-up translates to ca. 30,000 office workers Sources: CSO, Oxford Economics, CBRE Hotels Research DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 33

34 OFFICE TAKE-UP IN THE FUTURE % Change in Office-Based Employment, % 15.0% More office take-up and office-based employees in Dublin 10.0% 5.0% More corporate demand for hotel rooms 0.0% Sources: Oxford Economics, CBRE Research DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 34

35 NEW INFRASTRUCTURE NEW DEMAND GENERATORS Dublin Airport Runway 2020 Dublin Central Scheme Cherrywood Development New Children s Hospital Dublin Metro North DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 35

36 Emerging Deal Structures 04

37 EMERGING DEAL STRUCTURES Ground Leases Term: 100 years + Rents: 10% - 20% of EBITDAR Reviews: RPI or CPI with cap and collar Buyback: Possible provision for lessee to buyback freehold interest London yields: +/- 2% Income Strip Term: 40 years + Rents: 10% - 20% of EBITDAR Reviews: RPI or CPI with cap and collar Reversion: Buyback freehold at expiry for 1 London yields: +/- 3% Sale & Leaseback Term: 25 years + Rents: 55% - 65% of NOI Rent Cover: 1.5 to 1.8 times Reviews: RPI or CPI with cap and collar Covenant Strength: Parent guarantee/ rent deposit/ bank guarantee/ insurance bond Other conditions: Provision of financial information/ obligation to put FF&E fund in place London yields: 4%+ DELOITTE HOTEL INVESTMENT BREAKFAST BRIEFING 37

38 THANK YOU. For more information please contact: Dave Murray T E: dave.murray@cbrehotels.com Debbie Hugger T E: debbie.hugger@cbrehotels.com 3rd Floor Connaught House Burlington Road Dublin CBRE, Inc. This information has been obtained from sources believed reliable. We have not verified it and make no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.

Dalata Hotel Group UK Expansion Strategy Dermot Crowley Deputy CEO, Business Development

69 Dalata Regional UK Research Structure 1. We examined 60 of the UK s largest Cities and analysed them using a range of different statistics including: Hotel Industry Financial Economic Demographic Employment metrics were compiled in total - narrowed down to 9 Specific weighting was put on each metric based on importance to give a bespoke ranking of cities (e.g. RevPAR held a 50% weighting). 3. The top 20 cities were then analysed in more detail as a target market London has been ranked but excluded from the list Tourism Education Social Deprivation Health Commuting Page 69

70 Dalata 20 Target Cities Identified From Research Following extensive research management have identified 20 provincial UK cities with strong opportunities for Maldron or Clayton hotels 1 Edinburgh 2 Manchester 3 Glasgow 4 Brighton 5 Bristol 6 Leeds 7 Liverpool 8 Oxford 9 Belfast 10 Reading 11 Birmingham 12 York 13 Cambridge 14 Southampton 15 Milton Keynes 16 Cardiff 17 Portsmouth 18 Newcastle 19 Bournemouth 20 Exeter Page 70

71 Background International Brands moving away from operating hotels Worldwide Rooms by Ownership Model Hilton Marriott/ Starwood IHG Accor Franchised 72% 43% 70% 33% Managed 24% 52% 30% Owned/Leased 3% 2% 0% *Accor do not disclose separately no. rooms managed, owned and leased 67%* Source : Company Websites Page 71

72 Target 20 Cities 3&4 Star Segment comprises 57% of the Market 3% 40% 35% 5 Star 4 Star 3 Star Budget & 2 Star 22% Page 72

73 Target 20 Cities Brand Shares Fragmented market with only budget brands having a significant share 12% 7% 5% 4% 4% 4% 3% 3% 3% 2% Premier Inn Travelodge Ibis Holiday Inn Hilton Holiday Inn Express Jurys Britannia Hotels Marriott Mercure Source : AM PM Hotels Page 73

74 Target 20 Cities Brand Shares in 3&4 Star Market Very fragmented with no dominant brand 8% 7% 6% 5% 5% 4% 4% 3% 3% 3% Holiday Inn Hilton Jurys Britannia Hotels Marriott Mercure Crowne Plaza Novotel DoubleTree by Hilton Radisson Blu Source : AM PM Hotels Page 74

75 Target 20 Cities Operator Shares in 3&4 Star Market Operators with less than 4% market share comprise 70% of the 3&4 star market 7% 6% 5% 4% 4% 4% 3% 2% 2% 2% Source : AM PM Hotels Page 75

76 Target 20 Cities Ownership Model in 3&4 Star Market Over 70% of the owner operators have 4 hotels or less 33% of the leased hotel operators have 4 hotels or less 16% 24% 47% Owner Operator Franchised Managed/Franchised Managed Leasehold 4% 9% Source : AM PM Hotels Page 76

77 Target 20 Cities Age Profile in 3&4 Star Market 24% 19% 18% 20% 18% Not Stated Under 10 years years Years 40 + years Source : AM PM Hotels Page 77

78 Target 20 Cities Fragmented Market offering Compelling Opportunity Dalata s management team believe that a large structural opportunity has emerged in the 3 and 4 star hotel markets in certain regional cities in the UK. Key drivers of this structural opportunity are: International brands are increasingly evolving to a franchise model leaving a shortage of operators with any scale Fragmented market in terms of Brands Ownership Operators The stock of 3 and 4 star hotels is considerably older than the age profile of the Budget sector Opportunity now exists for a hotel operator with a strong balance sheet and operational focus to become the market leader in fragmented 3 and 4 star hotel markets Page 78

79 Target 20 Cities Clear Competitive Advantage in Fragmented Market Dalata Competition Financial resources & Ability to secure sites Depth of Hotel Operational Expertise & Resources Senior Management Team Willing to put strong balance sheet behind strategy to own or lease Very attractive to developers & property investors Management and staff avail of comprehensive training & development programmes Highly motivated management teams with large growing hotel group Support of Central Office functions Existing management platform in place in the UK Senior management team has operated in UK hotel market for over 20 years Senior management team created, rolled out and operated a new brand in the UK previously Jurys Inn Large brands won t own or lease. Weak balance sheets for smaller operators Difficult for smaller operators or larger Third Party Operators (TPOs) to provide same level of training or opportunity due to lack of tenure (TPOs) or scale (independent operators) Not clear that same level of experience exists within TPOs or independent operators Large brands dependent on owners to roll out their brands Page 79

80 Target 20 Cities Key Objectives in Target UK 20 cities Our objective is to become the leading 3/4 star operator in our target city markets Target range of 10% to 15% market share of 3/4 star market in each city Translates to additional circa 8,000 rooms (assuming a 12.5% market share in achieved) in 5 7 years Further opportunities are likely to exist in the Greater London area and adjacent to UK airports but Dalata will look to address those opportunities in a more bespoke manner as and when they arise Page 80

Target 20 Cities Early examples of UK expansion strategy Hotel La Tour (Birmingham) Existing Asset Bought in July 2017 for 31m Sold Freehold to Deka Immoboilien and entered a 35 year lease

opportunities to reduce costs and increase revenues Rebranded as a Clayton hotel in October Clayton Manchester Development asset Agreement for lease contracts exchanged Planning

81 Target 20 Cities Early examples of UK expansion strategy Hotel La Tour (Birmingham) Existing Asset Bought in July 2017 for 31m Sold Freehold to Deka Immoboilien and entered a 35 year lease at initial rent of 1.6m p.a. Modern hotel with 174 rooms, restaurant, bar and extensive meeting facilities Exploring potential to add a further 40 rooms Have identified significant opportunities to reduce costs and increase revenues Rebranded as a Clayton hotel in October Clayton Manchester Development asset Agreement for lease contracts exchanged Planning application in Q Excellent city centre location Portland Street Local well regarded developer Property Alliance Group Rent cover Yr 3 > 1.85X Will be branded a Clayton Target opening mid 2020 Page 81

Target 20 Cities Early examples of UK expansion strategy Clayton Glasgow, Clyde Street Development asset Agreement for lease contracts exchanged Planning application in Q1 2018

Real Estate Investors Target opening H2 2020 Maldron Glasgow, Renfield Street Development asset Agreement for lease contracts exchanged Planning application in Q1 2018 Circa 250

82 Target 20 Cities Early examples of UK expansion strategy Clayton Glasgow, Clyde Street Development asset Agreement for lease contracts exchanged Planning application in Q Circa 300 bedroom new build Clayton Hotel Very close to retail and leisure attractions International Financial Services District within 5 minute walk Developer partner is Artisan Real Estate Investors Target opening H Maldron Glasgow, Renfield Street Development asset Agreement for lease contracts exchanged Planning application in Q Circa 250 bedroom new build Maldron Hotel Very close to retail and leisure attractions Within theatre district of Glasgow Developer partner is McAleer & Rushe Target opening Q Page 82

83 Questions

86 Thank you for joining us this morning Hotel Investment Breakfast Briefing 2018 Deloitte Ireland

87 Deloitte Debt & Capital Advisory Leading Independent Business Advisors Hotel Investment Breakfast Briefing 2018

Dalata Hotel Group January 2018 ISE: DHG LSE: DAL

Dalata Hotel Group January 2018 ISE: DHG LSE: DAL Disclaimer The presentation contains forward looking statements. These statements have been made by the Directors in good faith based on the information