Sanguine makes its move on on Manchester

SANGUINE Hospitality is to planning to build a 150-bed Indigo Hotel with a Marco Pierre-White restaurant after acquiring the City Buildings in Manchester.

The company exchanged contracts for the building at Corporation St near Urbis on Christmas Eve. Sanguine Hospitality’s co-founder Paul Bolton said the site was one of three which the firm had identified in the city as potential venues for new branded hotels.

The Liverpool-based hotels development and management company has ramped up activity in recent months due to the availability of good properties at decent prices, which Bolton believes is partly due to a continued lack of appetite from high street banks to fund commercial property opportunities.

Bolton said that the firm, which is due to start work on branded hotels at Birmingham, Sheffield, Newcastle, Hoylake and Exeter over the next 12 months, has picked up almost all of the new sites it has developed over the past few years from administrators or distressed purchasers.

The development capital to build its branded hotels is usually provided through the sale of properties to a mix of funders including Bolton himself, Sanguine, and a network of high net-worth individuals who are brought to deals via Downing Corporate Finance.

It has taken advantage of a scheme known as Business Premises Renovation Allowance due to expire in April 2012 that gives investors tax relief on properties which are being brought back into use.

However, some of its future buildings could be bought by investors in a new property fund known as Blackmore Branded Commercial Opportunities Fund which has been created alongside Paul Wildes, the entrepreneur who founded and subsequently sold Manchester-based student properties firm Mansion Group.

“There’s never been a better time to build a business like this,” Bolton told TheBusinessDesk.com.

“We currently manage seven sites but by this time next year we’ll be at 12 and in 18 months we’ll be at 17.”

Bolton and his co-founder Simon Matthews-Williams started Sanguine Hospitality in December 2006 – around three years after both had sold their interests in other ventures. Matthews-Williams had sold his stake in Liverpool-based Centre Island Hotels, while Bolton had sold the Charlton Homes residential developer and apartments firm Space Group to McInerney Holdings.

The company’s first purchase was Hoole Hall hotel in Chester. Bolton said the company spent “millions” on its redevelopment but weren’t managing to achieve the occupancy levels 0f 57-60% until they did a deal with the Hilton hotels group to convert it into a Doubletree by Hilton hotel, spending around £700,000 on a conversion that involved the installation of new IT and telephone systems as well as Hilton-branded equipment.

“For two weeks nothing happened but then the reservation system kicked in and then within the first three days we booked 1,700 beds through it. Everything we do now is branded.”

For instance, the hotel next to Exeter Airport will be a 151-bed Hampton by Hilton hotel, which will also have a “Frankie’s” restaurant – a brand developed by Marco Pierre White alongside Italian jockey Frankie Dettori.

Sanguine has an agreement in place with Pierre White to develop Marco Pierre White restaurants alongside many of the hotels. It also has agreements in place with many of the world’s biggest hotel companies including Hilton, Days and Intercontinental Hotels Group – owner of the Indigo, Holiday Inn Express and Crowne Plaza brands – to operate their hotels and all of the properties currently under development will feature one of their brands.

“We feel privileged to be partnering with the biggest hotel brands in the world,” said Bolton. He argued that the brands themselves had proved to be extremely robust despite a turbulent hospitality market overall, with Intercontinental Hotels Group’s market cap growing from £1.6bn to around £3.5bn over the past couple of years.

“In arguably the worst recession since the 30s they’ve doubled their market cap.
“The banks like the big brands, the public like them, the commercial sector likes them and we like them as they bring in customers.”

The hotels are all built as separate property ventures but looked after by Sanguine’s own hospitality management company. Bolton said that the firm will have a development turnover of £28m next year, while its existing sites should bring in sales of around £17m.

They are also being built by Denizen Contracts – a company set up by Bolton to handle the construction of its sites. Bolton said that he hadn’t intended  to run another construction-related business, but did so after the firm had hit problems with getting external contractors to deliver projects on time and to budget.

“I thought, ‘this is stupid’. This is my background.”

He said that both he and Matthews-Williams had “put everything we’ve made” back into Sanguine (managing director Nick Taplin also has a stake in the business). However, he added that he was very confident about its prospects. The only potential stumbling block, he feels, is in bringing enough of the right calibre of staff on board.

“We’ve already got a large team of people but our big challenge will be dealing with growing pains,” he said.

“We’ve got an excellent board with Me, Simon, Nick, two senior guys who are both ex-RBS and a former vice-president for Intercontinental Hotels Group in Europe. We’re also recruiting now for our new openings. This recession is the first time I can think of where you have good people who are unemployed.”