Coronavirus pandemic interrupted at least 5 major hotel transactions in Bucharest
The coronavirus pandemic interrupted, in Bucharest alone, more than five major hotel transactions that had reached the final negotiation phase, with buyers being both Romanian and foreign businesspeople, stated Alexandru Sorin Ionescu, founder of the hotel consultancy firm Fivestar Hospitality, which also manages the website hotelsforsale.ro.
He estimates that, following the crisis, hotels under negotiation will become cheaper.
The coronavirus pandemic did not only unpleasantly surprise the population, but also economic actors involved in various transactions, who, without a clear perspective of what is to happen next, suspended their efforts.
„The crisis triggered by the coronavirus pandemic interrupted, in Bucharest alone, at least five major hotel transactions that were to be purchased by foreign and Romanian investors. The crisis came at the moment when the key commercial terms of these transactions had been established and the due diligence steps were to be carried out to finalize the transactions,” stated the Fivestar Hospitality representative.
He expects some of these transactions to be permanently canceled, and the others to be renegotiated, because following this crisis, the cost of financing will change both in terms of money borrowed from banks and in terms of equity.
„Equity will become at least two percentage points more expensive. The impact of the increase in the cost of equity and potential increases in bank financing interest rates will diminish the value of hotels in the process of being sold. We do not know by how much hotels will become cheaper, because we do not know how banks will react, as they have now stopped financing transactions and development projects and are waiting to see when we emerge from the crisis to do their calculations,” the hotel consultant added.
Source: Profit
Frequently Asked Questions
Why were the hotel transactions in Bucharest interrupted?
The transactions were halted due to the uncertainty caused by the coronavirus pandemic and the suspension of bank financing for new projects.
Who were the potential buyers for these hotels?
The potential buyers included both Romanian and foreign investors who were in the final stages of negotiation.
How is the crisis expected to affect hotel prices?
Prices are expected to decrease as the cost of equity and bank financing increases, leading to renegotiations of existing deals.