Israeli Fattal Hotels' M&A Spree Reaches $213 Million

The company is focusing on real estate investments in Central and Western Europe, either in major cities or near airports.

The Fattal hotel in Amsterdam.
Fattal

The Fattal hotel chain has made five acquisitions over the past three months totaling 800 million shekels ($213 million).

Four of those deals, involving the purchase of seven hotels for about 650 million shekels, were done in the last three weeks of September alone by a subsidiary, Fattal Properties (Europe). The fifth was signed three months ago.

The latest deals come just a few weeks after Fattal Properties (Europe) raised 375 million shekels via three bond issues in Tel Aviv. Altogether, the company seeks to buy nine hotels.

Fattal’s strategy is to focus on real estate investments in Central and Western Europe, either in major cities or near airports. Unlike in previous years, Fattal has also begun buying properties in modest condition and investing to renovate them. In some places like Amsterdam, it has even built hotels from scratch to take advantage of rising prices.

One deal around two weeks ago was the purchase of a hotel in Edinburgh for 43.3 million pounds (212 million shekels). A second, which hasn’t yet been sealed, was for the purchase of four hotels in Ljubljana, Slovenia, for 45 million euros (190 million shekels). The Slovenian hotels have 574 rooms and 30 conference halls.

In a third deal around three weeks ago, Fattal signed a memorandum of understanding to buy leasing rights and construction services for a hotel in Amsterdam for 47.25 million euros (200 million shekels). Earlier still, it bought two three-star hotels in Madrid for 31 million euros (140 million shekels). The Madrid hotels have a combined 228 rooms.

Last Tuesday, Fattal announced its fifth deal. With the Shlomo Group’s real estate arm, it bought the Hotel Gran Atlanta in downtown Madrid for 24 million euros (102 million shekels). The four-star hotel, which has 180 rooms, is near both the AZCA commercial center and the Real Madrid soccer team’s home stadium, Santiago Bernabeu.

The partners, who will each own 50 percent of the hotel, plan to spend 5.5 million euros renovating it. But before that, they plan to lease it to Fattal’s management company, Sunflower, for 20 years. Sunflower will pay them annual rent of 2.1 million euros plus a percentage of any hotel revenues topping 5 million euros a year.

Bank loans will finance 60 percent of the cost of buying and renovating the hotel. The remaining 12 million euros will be financed from the companies’ own resources, mainly bonds issued in Tel Aviv.

Fattal Properties (Europe), a subsidiary set up specifically to issue bonds in Tel Aviv, owns hotels in Germany, Switzerland, Italy and Spain. Its parent, Fattal Hotels Company, is owned by David Fattal (72 percent), Migdal Insurance (18.5 percent) and Fattal’s ex-wife Hadassa Fattal (9.5 percent). Fattal Hotels owns some 100 hotels in Israel and Europe with a combined 17,000 rooms.

Fattal’s estimated market value, based on comparisons with hotel chains traded on American and European exchanges like Hilton, Starwood and Marriott, is between 3.2 billion and 3.5 billion shekels.