Dawnay Shore Hotels (DSH) has become the first UK hospitality business to publicly announce that it's considering transferring its assets into a Real Estate Investment Fund (REIT).
NM Rothschild & Sons and Shore Capital and Corporate were appointed as joint financial advisers last week to conduct a strategic review into the company's business.
DSH is the first UK hotel group to announce a review into the potential benefits of transferring the company's property assets into a REIT (see panel), when they are introduced as a property investment vehicle in January.
DSH chief executive Charles Prew said the review was being conducted to ensure shareholders received the best value from the company's assets. Selling the company as a whole, he added, was another option under consideration.
Phil Camble, senior manager of travel, leisure and tourism at consultancy KPMG, warned that it might be too early to transfer a hotel business into a REIT.
"It may be better to see how larger property owners adapt into the REIT structure first. It's a bit early for most hotel ownership vehicles, which are smaller than the big landowners," he said. "I would expect to see hotel groups in the second or third wave of conversions, after it becomes clear how the big boys have done."
The Hotel Corporation owns 49.9% of DSH, which runs 20 four-star regional hotels operating under the Paramount brand, including the Lygon Arms hotel in the Cotswolds and Edinburgh's Paramount Carlton. The company was established in 2004 by Dawnay, Day and Shore Capital.
What is a REIT?
A Real Estate Investment Trust is a tax-efficient investment vehicle which allows individuals to invest in property through the Stock Exchange.
Properties within the portfolio must comply with Schedule A - so must generate their own income, generally through a fixed commercial rent.
Individually owned hotels and restaurants are now allowed to be part of a REIT. An individual can own a maximum of 10% of each trust.