Buildings with a fifty-year life and a five-year memory.
How we buy hotel property, how we hold it, and how the capital burden is shared with the operator.
Acquisition
- We assess
- Trade the building can support
- Physical condition, surveyed
- Operator covenant
- Capital programme required
The first question is what the building can genuinely trade at with a competent operator running it — not what it once did, and not what a projection says it might.
The second is condition, established by survey before exchange or conclusion of missives. Hotels hide deferred maintenance well: the public rooms are decorated because guests see them, while the roof, the plant and the bedroom services are where the money has not been spent.
We would rather buy a building whose problems we have costed than one that presents well and has a decade of deferral behind the plasterwork.
The lease
- Settled at the start
- Repairing obligations
- Plant replacement responsibility
- Refurbishment cycles
- Rent review basis
Almost every dispute between a hotel owner and a hotel operator is really a dispute about who pays for capital work, and almost all of it can be avoided by settling that question in the lease rather than discovering it when the lift fails.
We would rather negotiate a longer document at the start than rely on a short one and a good relationship. Relationships change with the people in the roles; the lease does not.
Where we take responsibility for structure and plant, we fund it, and we would expect an operator to hold us to that in writing.
Holding
The unglamorous part, and the part that decides whether an asset is worth anything in twenty years.
Capital programme
Roof, envelope, plant and services on a schedule with money set aside, rather than as emergencies.
Compliance
Fire safety, electrical and gas testing, water hygiene and asbestos management, evidenced rather than assumed.
Refurbishment
Bedroom and public area cycles agreed with the operator so neither side is surprised by the timing.
The decision to hold
Periodically and honestly. Defending an old decision past the point it stopped being right is the failure mode.