Follow up: Sircle pushes the boundaries

The Sircle circle, centered around the celebrated hotelier Liran Wizman, is expanding. The ambition, said Wizman, is to triple the size of the Sircle Collection while giving “above average” returns.

Wizman told Hotel Investment Today that it will take between three and five years to grow his 37-strong hotels business into a company with 100 properties. Many will be branded under the Sir Hotels banner most closely associated with Wizman but the company will also add to its Max Brown budget-price properties and The Cover, its private members’ club concept.

At present, Sircle owns the real estate beneath between 60% to 65% of the 37 hotels currently in its portfolio. In future, said Wizman, it could settle at round 50/50. But the precise structure will depend on the opportunities which arise.

As well as hotel real estate, Sircle will look for leases and management contracts which might be operated under brand banners developed outside the Sircle circle. Wizman hinted that single deals involving as many as 20 properties are in the pipeline.

IPO mechanics

The financial mechanisms are being built around an IPO which, given the dearth of public market moves in recent months and years, is itself evidence of Wizman’s confident wish to enlarge his sphere of influence.

Sircle Hospitality Group, to give it its current full name, is merging with a Luxemburg registered special purpose acquisition company called SMG European Recovery. The latter already has a listing on the Frankfurt bourse and, following completion expected in the second quarter of this year, the listed entity will be called Sircle SE.

Sircle Collection's Sir Adam Amsterdam

SMG European Recovery is a creation of SMG Holding, a finance house specializing in the development of companies in several unconnected sectors including technology, energy and real estate as well as hospitality.

Stefan Petrikovics, the founder and CEO of SMG European Recovery, will become the deputy chairman of the newly fashioned company. “We are not in the business of creating average hotels and we are not in the business of creating average returns,” he said.

Petrikovics added that the SMG-inspired listing mechanism “takes uncertainty around execution, capital injection, and valuation – three things which often affect a traditional IPO – out of the equation.”

Most of the €40-60 million of new capital expected to come as a result of the IPO will finance acquisitions. Money for conversions and refurbishment, as well as maintenance, will come from cash generated from operations.

After listing and the introduction of the new capital, Wizman’s stake in the business will reduce from 100% to around 75%. The expectation is that the company will have €400 million of assets at flotation with an initial market capitalization of €250 million.

Debt secured on Sircle assets accounts for the difference. The loans are pegged at around 50% of the value of real estate on which they are secured.

Sircle’s clear intention is to raise further capital as it is needed. Petrikovics said the aim is to create a capital structure which is about half equity, half debt though capital will be sought in forms suited to the economic and investment market conditions prevailing when the money is needed.

The newly formulated company will create opportunities, said Petrikovics, for investors to benefit from the burgeoning lifestyle segment of the hospitality sector. He noted that less than 20% of European hotels are branded compared to 60% in the US.

We like places where there’s business travel in the week and leisure at the weekend. And some of both at all times. We love the mix.

Liran Wizman

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SMG Holding’s investor base includes more than 30 long-term orientated family office investors, as well as institutional investors from Western Europe, the U.S., Middle East and Asia. “We attract investors who, of course, want good returns but are happy to be patient,” Petrikovics said.

Stated goals

Wizman, who lives in Amsterdam, founded Sircle 20 years ago. He is also the co-founder, with Yossi Eliyahoo of The Entourage Group, described by the company as Sircle’s “strategic culinary partner.”

His speciality is “rebranding and redeveloping venues all over Europe. . . creating innovative and memorable experiences that are tailored to unique locations.”

Sircle expansion will come, Wizman said, in European cities, including those where it currently operates. “We want to go to places where we are already. We want to be in exciting cities such as Amsterdam, Barcelona, London, Milan, Madrid, Berlin and Vienna.” The goal is to have around 10 hotels in each of the high-value European cities Sircle identifies as suitable.

“We like places where there’s business travel in the week and leisure at the weekend. And some of both at all times,“ Wizman said. “We love the mix.”

He also loves Sircle’s platform, which is utilized wherever they think the returns will be biggest. “If we think real estate asking prices are too expensive, we will look at lease or management deals,” Wizman added. “If we think there are great opportunities in real estate – and we think there will be great opportunities – we will buy hotels outright.”

Hotels under the aegis of André Balazs and Ian Schrager, and those in the Ennismore portfolio, are among those Wizman most admires. However, he said Sircle’s determination to add vibrancy to the shared spaces – notably by the food and beverage services - sets Sircle apart from comparators.

Not a “room machine”

Food and beverage features differentiate Sircle from the rapidly growing number of competitors in what has become commonly known as the ‘lifestyle’ segment of the hospitality sector.

The Sir Adam in Amsterdam and the Sir Victor in Barcelona are among the hotels already taking guests. F&B offerings include Seven North Restaurant and Miznon in collaboration with celebrated chef Eyal Shani. “We're set to raise standards and shape the future of lifestyle hospitality,” Wizman said.

Wizman further explained that Sircle takes hotel public areas very seriously to be much more than “a room machine” and to “raise standards and shape the future of lifestyle hospitality.”