Israel’s Brown Hotels to merge with Israel Canada Hotels

TEL AVIV – Brown Hotels, with boutique properties in Israel and Greece, is being sold for NIS 100 million ($US25.5 million) to real estate firm Israel Canada and being merged with Israel Canada Hotels.

Israel Canada’s Barak Rosen and Asi Touchmair announced the signing of two non-binding memorandums of understanding (MoUs) to acquire the Brown Hotels brand from Nir Waizman, Leon Avigad, Nitzan Perry and Hachshara Insurance. At the same time, Globes reported that talks are being held to merge Israel Canada’s hotel activities into the DNA Group stock market shell.

In the first of the MoUs, Israel Canada Hotels will take on the lease agreements for eight Brown Hotels (1,067 rooms) in Greece for no payment. Similarly, Israel Canada is taking on the leases for Brown Hotels in Tel Aviv and Jerusalem.

In addition, Israel Canada Hotels has signed an MoU to buy Brown Hotels in Israel. It will pay NIS 100 million (US$25.5 million), including NIS 27 million in cash and the rest by taking on debt. The deal includes 10 hotels with 779 rooms, including furnishings and the Brown and Lighthouse brands, online activities and loyalty program.

“The company’s future strategy is to expand overseas and there is no doubt that the deal in practice can consolidate the management platform abroad,” Israel Canada Hotels CEO Reuven Elkes told Globes.

Prior to the Brown Hotels deal, Israel Canada Hotels had 15 hotels - 12 in Israel and three in Greece. After the Brown Hotels deal is completed, Israel Canada Hotels will have 3,600 rooms systemwide.

Joseph Fischer with Vision Hospitality & Travel in Tel Aviv told Hotel Investment Today that he assumes the CEO of Israel Canada Hotels will look to take the group public at the TASE and put itself in a similar position to Fattal Hotels, Isrotel and Dan Hotels. “Now that he has some meat on the bones with brands, an international footprint, a large portfolio with a small equity partner, Menora, it seems logical for the Israel Canada owners to spin off their hotel business separately from Israel Canada Real Estate group,” he said.

Fischer added that he thinks the two reasons that led to the Brown sale were the system of real estate long-term leases and the war [against Hamas] that forced down Brown Hotels to crisis occupancy levels. “They still needed to pay the leases and the renovation costs,” he added

Fischer also said being a small, lifestyle hotel company, Brown could not take the tens of thousands of displaced Israelis from the south and north. “The government paid the big hotels good money for housing the displaced families. Brown, in general, didn’t offer full F&B operations as the displaced people needed full board and kosher [meals.] So, they ended up empty in most of their Israeli hotels with a small percentage of Israeli tourists but mostly during weekends and holidays.”