Singapore’s ProsperCap seeks refinancing, growth

INTERNATIONAL REPORT – Singapore-listed ProsperCap, which owns 17 hotels with nearly 4,000 rooms in the U.K. under long-term franchise agreements with Hilton, IHG and Marriott, is actively seeking to refinance its hotel portfolio as existing loan terms mature at end of the year.

ProsperCap sprouted from Thai conglomerate DTGO Corp.’s £450 million acquisition of the U.K. assets from U.S. private equity fund Marathon Asset Management in late 2019. This marked DTGO's first investment foray outside Thailand. The acquisition was reportedly financed through a CMBS loan arranged by Goldman Sachs.

ProsperCap CEO and Executive Director Iqbal Jumabhoy said the timing is good for refinancing, while the company is also securing capital to refurbish and possibly increase room counts and/or add new facilities at some of the hotels. He declined to reveal the total CapEx required.

Jumabhoy’s optimism might be based on the fact that The Bank of England on August 1 cut interest rates for the first time since March 2020 to 5% after inflation reverted to its 2% target in May and held steady in June. Nevertheless, caution about cutting rates too quickly persists, with policymakers divided if inflation had eased sufficiently, Reuters reported.

AC Hotel by Marriott in Birmingham, one of 17 hotels owned by ProsperCap

ProsperCap's portfolio has also fully recovery from the pandemic, buoying optimism for better debt. The 17 assets generated £145 million revenue in FY23, 12.5% increase over FY22. Just-released first-half results saw revenue rising 3.5% over 1H23 to £67.9 million. This excluded the effects of a fire incident at one of its hotels, Crowne Plaza Stratford-upon-Avon, in April that affected room availability in May and June.

ADR rose 3.1% to £99.90 and RevPAR increased 1.3% to £76.41.

The company has yet to make a profit but pointed out that its normalized loss (excluding one-off income and expenses) of £3.9 million before tax for 1H24 was a 66.9% improvement over the loss of £11.9 million in 1H23.

As of June 2024, its net debt was £291 million, down from £318 million at end-2023. Net debt/total equity was 1.8, versus 2.54 at end-2023.

Next priority

Having put the pandemic behind it and laid out CapEx plans, ProsperCap appears to be kickstarting its growth plans, as seen in its listing in January this year on Singapore Exchange Catalist, a trading board that caters to young companies with growth potential. The aim is to raise awareness of the firm in the capital markets, which would enable it to seek funds for future growth, Jumabhoy said.

Following the listing, DTGO controls 85% of ProsperCap, and the rest public and other shareholders. Jumabhoy was recruited in 2023 to assist with the listing and lead the company to its next phase of growth.

In Thailand, DTGO’s diverse businesses include property developer Magnolia Quality Development Corp., although projects are mostly residential. Its notable hotel assets are the Waldorf Astoria in Bangkok and an upcoming Six Senses The Forestias, also in the capital city.

DTGO was founded in 1993 by Thippaporn Ahriyavraromp, daughter of Thai business tycoon Dhanin Chearavanont of the CP Group.

While hotel asset class is a fraction of its business back home, DTGO appears to have big ambitions abroad via the ProsperCap vehicle. When asked about growth prospects, Jumabhoy said, “The idea is to use the capital markets to create an investment management platform, initially in the hotel space but possibly in other allied hospitality spaces such as serviced apartments.”

Having a set-up in the U.K. means the U.K. and Western Europe are a logical growth prospect. The Benelux countries would also be easy for us to bolt-on, but we’re not looking at anything there right now.

Iqbal Jumabhoy

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ProsperCap’s latest financial statement also shows an ambition to expand to other real estate classes such as commercial and office, after an initial focus on investing in hospitality, which may include acquiring existing assets with operating agreements or partnerships with established operators or developers.

“My goal is to stay close to what we’re doing at the moment [i.e., hotels],” Jumabhoy said when asked about expansion to other all real estate classes.

On plans to expand hotel investments, he said, “Having a set-up in the U.K. means the U.K. and Western Europe are a logical growth prospect. The Benelux countries would also be easy for us to bolt-on, but we’re not looking at anything there right now.”

ProsperCap's 17 hotels are located in key U.K. regional cities, including Manchester, Birmingham and Liverpool. They are managed by third-party operator Valor Hospitality Europe while ProsperCap acts as asset manager.

Jumabhoy said that the regional U.K. markets in general can yield higher than world city London. “The cap rates and yields in London are about 5%, whereas you can push that up to 7% in the regional markets, which is quite a considerable jump,” he said.

The dynamics of operating in London and regional cities are different, he added. While London is international, a lot of the traffic in regional cities are local leisure and business travel. “The local markets have grown steadily, providing a steady demand,” he said, adding weddings, local functions, events, conferences and spa/health clubs are among the key segments.

According to Mordor Intelligence, the U.K. hospitality industry is expected to grow from $57.4 billion in 2024 to $65 billion in 2029. In its 1H24 financial report, ProsperCap said the market is seeing an increase in service apartments and shared spaces, which makes the U.K. affordable for millennials and younger generations. High disposable incomes locally and internationally have also boosted demand for hotel rooms and other hospitality services.

But there are challenges. A statutory wage increase of 9.8% from April 1, for instance, raised payroll costs at hotels. Recent anti-immigration riots forced ProsperCap to issue a statement on August 8 that hotels in the U.K. owned by the group remain in full operation and no direct threats or disturbances had been reported at the properties.

The new kid on the block could however be a feather in DTGO’s cap to seek prosperity beyond Thailand.