Activities

Marylebone Warwick Balfour (MWB) is a property investment group with interests in hotels, retail stores (including Liberty in London) and serviced offices. Its purpose is to realise its assets in the short to medium term and to provide a substantial cash flow back to shareholders.

It owns and develops hotels in the UK. Initially it made 20-year operating and management agreements with hotel operators. However, since 2000 it has become both owner and operator of two leading boutique chains, Malmaison and Hotel du Vin.

The group also owns two hotels that are managed by Marriott . By 2005, hotels represented 74% of its business and accounted for £455m of its assets.

In December 2005, the directors of MWB set up a separate company, Alternative Hotel Group, to buy Initial Style Conferences (a chain of 29 training and conference venues) from Rentokil Initial for £325m. The business is not part of MWB.

Timeline

• 1994: MWB is founded by Richard Balfour-Lynn, John Harrison and Joe Shashou
• June 1997: MWB becomes a public company through a reverse takeover of the listed Ex-Lands Properties plc.
• 1998: MWB buys a former hospital in London’s Charterhouse Square which is intended to become the first of a four-star line of boutique hotels. In fact, it becomes the first London Malmaison at the end of 2003.
• 1999: MWB agrees to build a £56m Sofitel hotel on Crown Estate land in Pall Mall, London, for French hotel group Accor. The 186-bedroom hotel opens in April 2002.
• March 2000:  MWB buys a 95-year lease on the five-star Howard hotel in London from Ellerman Investments for £40m. It subsequently spends £15m refurbishing the property, which is managed by Swissôtel.
• November 2000: MWB buys the five-strong mid-market boutique hotel group Malmaison for £65m, acquiring properties in Glasgow, Edinburgh, Manchester, Leeds and Newcastle. The group buys the rights to the Malmaison name for £11m in a joint venture with hotel operator Rezidor SAS Hospitality, which secures a 20-year management contract for the brand.
• 2002: MWB opens a sixth Malmaison in Birmingham
• September 2002: MWB buys out Rezidor’s stake in Malmaison for £6m and takes over its 18-year management contract for a further £7m.
• November 2002: MWB opens both the £45m Radisson Glasgow and the five-star 157-bedroom London Marriott Hotel Park Lane in London following a £95m renovation of the property.
• June 2004: The five-star 301-bedroom Marriott West India Quay hotel opens.
• March 2004: MWB buys the McCausland hotel in Belfast, and reopens it as the first Irish Malmaison in December. It includes two rock’n’roll suites designed by managing director Robert Cook.
• October 2004: MWB buys the six-strong Hotel du Vin chain for £66.4m from entrepreneurs Robin Hutson and Gerard Basset, 10 years to the day after its creation in 1994. The group has a seventh hotel in the pipeline which opens in Henley-on-Thames in Oxfordshire in March 2005.
• November 2004: MWB sells the Howard hotel in London for £75m to Samosir. It continues to be managed by Swissotel.
• July 2005:  MWB announces that it has raised £105m in new funding to expand Malmaison and Hotel du Vin. The arrangements give the Royal Bank of Scotland a 17.5% stake in the two brands.
• November 2005: The second Malmaison-run café (called TEA) opens at MWB's London department store Liberty. The first café was launched at the Newcastle Malmaison in the summer of 2004. A ninth Malmaison opens in Oxford.
• December 2005: MWB sells the five-star Radisson Glasgow hotel to the WG Mitchell Group for £52.5m, 18 months ahead of plan. It intends to use £33.8m of the proceeds to repay the debt on the property.
• February 2006: MWB signs a £17m deal to open two new Hotel du Vins in 2007, in Cambridge and York.
• May 2006: MWB sells the London Marriott Hotel Park Lane to a private Middle Eastern investor for £105m, around £4m over book value.

Financial snapshot

Full Year

Turnover: £236m (2004: £241m)
Pre-tax profit: -£15.6m (2004: -£3.3m)

Half Year

Turnover: £124m (2004: £112m)
Pre-tax profit: ££2.5m (2004: -6.7m)

Full-year end: 30 June 2005
Half-year end: 31 December 2005

Operating data

Combined Malmaison/Hotel du Vin figures for the  the six months to 31 December 2005
Turnover: £36m (2004: £31.2m)
Ebitda: £11.1m (2004: £8.1m)
Pre-tax profit: £2.3m (2004: £1.3m)
Food and beverage sales: £15.5m (2004: £13.3m)
Average room rate: £105
Occupancy: 81%

Total number of hotels: 17

Number of staff in the hotel business: 1,385 (800 at Malmaison, 550 at Hotel du Vin, 35 at head office)

Malmaison: nine hotels (Belfast, Birmingham, Edinburgh, Glasgow, Leeds, London, Manchester, Newcastle, Oxford, )
Figures for the six months to 31 December 2005
Turnover:  £21.7m (2004: £21.5m) 
Ebitda: £7.6m (2004: £6.4m)
Pre-tax profit: £1.7m (2004: £1.1m)
Average room rate:  £103 (2004: £101)
Occupancy: 78% (2004: 78%)

Hotel du Vin: seven hotels (Birmingham, Brighton, Bristol, Harrogate,  Henley-on Thames, Tunbridge Wells, Winchester)
Figures for the six months to 31 December 2005 (2004 figures cover the three months from October 2004)
Turnover: £14.3m (2004: £6.3m)
Ebitda:  £3.4m (2004: £1.7m)
Pre-tax profit: £664,000 (2004: £247,000)
Average room rate: £111 (2004: £110) 
Occupancy: 87% (2004: 82%)

Other hotels
Five-star Marriott West India Quay, opposite Canary Wharf (301 bedrooms, plus158 luxury apartments in the complex)

Strategy

“The main corporate feature of the half-year was the successful raising of £105m of equity and debt to enable the UK’s leading boutique lifestyle hotels group to lay the foundations of our planned expansion. The Royal Bank of Scotland (RBS) provided £30m of equity, taking a 17.5% shareholding, while Bank of Scotland and RBS underwrote the senior debt funding. The finance is being used to expand the Malmaison Group from its present 16 operating hotels to at least 25 over the next three years.

We currently have two further hotels under development and two additional sites have been acquired. These include a new-build Malmaison in Liverpool’s Princes Dock which is due for completion at the end of 2006 and will provide 130 rooms. Also included is Reading, where we are refurbishing the former Great Western station hotel in the town centre for a 75 room Malmaison, incorporating our successful high street concept ‘Café Mal’, which we anticipate opening during the first half of 2007.

Elsewhere we have announced that two new sites have been acquired for Hotel du Vin in Cambridge and York, both of which will offer 42 rooms."

Source: interim results statement, 28 March 2006

Chief executive

Richard Balfour-Lynn

Key directors

Chief executive officer for Malmaison and Hotel du Vin: Robert Cook
Hotel directors: Bruce Cave, Clive Hillier
MWB hotel and residential property director: Joseph Shashou
MWB commercial property director: John Harrison
MWB joint finance directors: Andrew Blurton, Jagtar Singh
MWB legal and commercial director: Michael Bibring
Non-executive chairman: Eric Sanderson

Contact

1 West Garden Place
Kendal Street
London
Greater London
W2 2AQ

Tel: 020 7706 2121
Fax: 020 7706 8181

E-mail:
Website: http://www.mwb.co.uk

Commentary

MWB has put itself firmly on the hotel map as the owner of not one but two boutique chains. Malmaison and Hotel du Vin both offer style at an affordable price and put an unusual emphasis on good food and wine. But, as they were very much the individual vision of their founders, there were some concerns they could lose their distinctive identities in a plc environment.

Robert Cook pledged that, while the two brands will share central reservations, marketing and purchasing functions, they will operate quite separately.

Malmaison, which was founded by Ken McCulloch in 1994 and expanded in a joint venture with Arcadian International, was felt to have lost its way after passing through a number of hands after McCulloch bowed out in 1999. First, Arcadian (and its half-share in Malmaison) was bought by Patriot American (now Wyndham International). Malmaison was then jointly owned by Rezidor and MWB before being bought outright by MWB in 2002. In four years there had been just two openings, in London and Birmingham.

Malmaison is now back on track and making a profit. It has been positioned as a more contemporary city brand while Hotel du Vin is aimed largely at cathedral towns and cities.

The 10th and 11th Malmaisons are due to open in Liverpool in 2006 and Reading in 2007 while two new Hotel du Vins will open in Cambridge and York in 2007, bumping up the total to nine properties. Other sites being investigated include Dublin, London’s West End, Paris and New York (for Malmaison) and Chester, Durham, Edinburgh and St Andrews (for Hotel du Vin).

MWB now has the funds in place to fuel its ambition of growing the boutique chains to at least 25 properties in the next three years or so, when it is expected to demerge the boutique brands. 

Of the two remaining hotels managed by third parties, MWB has put the Marriott Park Lane on the market for £100m and will offload the Marriott West India Quay within the next two years.