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art’otel chelsea new york

538, 540, 542 West 29th Street

Introduction
CHELSEA NEW YORK
Opportunity to participate in the development of an iconic lifestyle hotel on a parri passu basis with PPHE Hotel Group, creating a flagship property in the
cultural centre of Manhattan’s New West Side – Hudson Yards. The site, located at 538, 540 and 542 West 29th Street is within the zoning district where hotels
are a permitted use.

Hotel Opportunity
The proposed art’otel will feature world-class architecture and interior design, 170 bedrooms and suites, a destination restaurant, ground-floor café bar, art
gallery, meeting and events spaces, pool, gym and spa facilities. The gross area will be approximately 8,920 sqm, including spacious bedrooms of around
27 sqm on average.

PPHE Hotel Group (“PPHE” or “The Group”)

PPHE is an international established hotel owner and operator, with a strong track record in developing successful upper upscale and lifestyle hotels. The
Group is enlisted for the FTSE 250 and FTSE All Shares Indices of the London Stock Exchange, with a portfolio of 38 hotels, 8,800 rooms and a further 650
keys in the pipeline.

Location
538, 540 and 542 West 29th Street is half a city block to the West of the High Line and one block to the South of Hudson Yards. The High Line is among the
most important tourist attractions in the US, with five million visitors annually. Hudson Yards is the single largest real estate development in the history of the US
and offers its own metro station and world-class office, retail and residential space.

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 Overview
PPHE Hotel Group is an international hospitality real estate company, with
shares listed on the London Stock Exchange and a constituent of the
FTSE 250. PPHE Hotel Group also holds a controlling ownership interest
in Arena Hospitality Group, whose shares are listed on the Prime market of
the Zagreb Stock Exchange. PPHE Hotel Group’s guiding principle is to
generate attractive returns from operations and long-term capital
appreciation.
Through its subsidiaries, jointly controlled entities and associates it owns,
co-owns, develops, leases, operates and franchises hospitality real estate.
Its primary focus is full-service upscale, upper upscale and lifestyle hotels
in major gateway cities and regional centres, as well as hotel, resort and
campsite properties in select resort destinations.
The Group currently has a market capitalization of £822.5m (at June 2019)
and total assets worth £1.7bn on its balance sheet.
PPHE operates, develops, owns, co-owns, leases and franchises real
estate properties, with a focus on full-service upper upscale and lifestyle
hotels in key European cities.
The Group manages a portfolio of 38 hotels with 8,800 keys, with over 500
bedrooms currently under development in central London.
For further information on PPHE including the latest annual and investor
reporting, the Group’s legal structure, ownership and financial strength,
please visit PPHE’s website www.pphe.com.
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Development Experience
PPHE developed over 30% of its portfolio from the ground up, totalling
approximately 2,700 rooms within ten hotels.
PPHE’s is responsible for the single largest ground-up hotel development
in London in the past 30 years – Park Plaza Westminster Bridge – which
extends in excess of 70,000 square meters and features over 1,000
bedrooms, four food and beverage outlets and extensive conference space
(including two large basement levels).
The Group’s most recent projects across Europe include:
• Park Plaza Nuremberg, Germany, featuring 177 bedrooms, a
restaurant and bar as well as meeting space;
• £125m new-build and adaptive-reuse of Park Plaza London Waterloo,
featuring 494-bedroomat and suites, restaurant, bar, spa and
conference facilities;
• £54m redevelopment and extension of Park Plaza London Riverbank,
adding 185 keys over six floors and a spa with a pool; and
• £9m repositioning of Holmes Hotel London into a leading lifestyle hotel
on trendy Chiltern Street.
Recently, PPHE started the construction of the 34,000 square metre,
art’otel london hoxton in Shoreditch, London. Once opened, the hotel will
offer 343 bedrooms and suites, a café, destination restaurant and bar,
outdoor terrace, spa, gym, art gallery, screening room, fully flexible
meeting and events rooms as well as extensive co-working space.
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 art’otel is a contemporary lifestyle brand, wholly owned by PPHE. The brand
benefits from the global Radisson Hotel Group (RHG) distribution system and
Radisson Rewards network.

The portfolio consists of a collection of lifestyle hotels, each inspired by a signature

artist, forming a cultural, gastronomic and social hub in the most creative areas of
the most interesting cities, filled with warm, welcoming, helpful staff and discerning,
cosmopolitan guests, buzzing with life all year round, in buildings as striking and
individual as the stunning art they host.

The brand’s portfolio currently totals five hotels, located in key European cities
namely Amsterdam, Budapest, Berlin and Cologne. The pipeline includes two
further hotels by 2021/22, to be located in central London and a third in New York
City expected to open in 2023.

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CONFIDENTIAL 5
 Hudson Yards is a neighbourhood in Chelsea, on the West Side of Midtown Manhattan, roughly between
the 10th and 12th Avenues from West 30th to 34th Streets.

As the single largest real estate development in the history of the US that started in 2006, the area has a
multitude of state-of-the-art office building, residential buildings, a mega-mall, New York’s first Neiman
Marcus (luxury department store), the innovative visual and performing arts centre, The Shed, and one of
New York’s top tourist landmarks, The Vessel.

Leading media companies such as Warner Bros.,

WarnerMedia, CNN and HBO have moved into Hudson
Yards, accelerating its position as the fastest growing tech
sector in the US. L’Oreal USA and Tapestry relocated their
head office to Hudson Yards, as well as other innovative
companies such as BCG Digital Ventures, BCG, SAP,
Intersection, Sidewalk Labs and VaynerMedia.

Hudson Yards is also a new financial, commercial and

business centre for New York, with major firms such as
KKR, Wells Fargo, BlackRock, Silver Lake, Third Point,
Intercept, Milbank, Point72 Asset Management,
MarketAxess, DNB, Boies, Schiller & Flexner and Cooley.

2019 celebrated the opening of Neiman Marcus, The Shed and The Vessel and saw over 100,000 visitors
visiting Hudson yards weekly.

Several office buildings such as 50 Hudson Yards, are still well under way. 50 Hudson Yards will feature
New York’s tallest observation deck, The Edge Observation Deck.

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 Pin Points of Interest Demand Type Distance (km) Walk
art’otel chelsea new york is only a few steps 1 Hudson Yards** Corporate / Leisure 0.4 4 mins
away from The High Line as well as The 2 The Shed MICE* 0.2 3 mins
Vessel - two of New York’s top tourist 3 The High Line Leisure 0.4 4 mins
attractions - and from multinational firms 4 Neiman Marcus Leisure 0.4 5 mins
located at Hudson Yards. 5 The Vessel Leisure 0.4 5 mins
6 Jacob K. Javits Convention Center MICE* 0.6 7 mins
The proposed hotel offers easy access to key
Pin Point of Access Transport Lines Distance (km) Walk
transport hubs within New York City, including
7 Pennsylvania Station Amtrak, Long Island Rail, NJ Transit 0.9 11 mins
Pennsylvania Station as well as the Blue and
8 34th St - Penn Station Blue (A, C, E) 1.0 13 mins
Red Lines. 9 34th St - Penn Station Red (1, 2, 3) 1.3 16 mins
* MICE: Meetings, Incentives, Conferences and Events
** Image shows “Edge Observation Deck’ (opening 2020)

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x 3 8

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CONFIDENTIAL 7
 Location

Battersea Power Station, London UK

Neighbourhood

Battersea

Opening

2021/22

Scheme

162 rooms
ground floor restaurant, bar and lounge
top floor restaurant & bar
roof terrace with pool & bar
spa with gym and treatment rooms
event space / gallery

Deal Type

Management Agreement

CONFIDENTIAL 8
 Location

84-86 Great Eastern Street, London UK

Neighbourhood

Shoreditch / Hoxton

Opening

2022/2023

Scheme

343 rooms and suites

restaurants, bars and lounge area
bar & event space on top floors
outdoor terraces
spa with swimming pool
gym with boxing ring
screening room
art gallery
flexible co-working space

Deal Type

Owner Operator

CONFIDENTIAL 9
 Proposed Area Schedule
The property is planned to extend over 13 floors above ground, along with
two basement floors (draft area schedule, subject to change).

Approx. NIA
Floor Facilities
(sqm)
2nd basement Total (incl. back of house and corridors) 850
( -2 ) Gym
Spa with treatment rooms
1st basement Total (incl. back of house and corridors) 800
( -1 ) Restaurant
Gallery
Meeting and event space
Ground Floor Total (incl. back of house and corridors) 500
(1st Floor) Reception & lobby
Bar
Meeting and event space
Garden terrace
Upper Floors Total (incl. BOH and corridors) 4,730
(Floors 2-13) 164 standard rooms (approximately 27 sqm)
6 suites (top floors)

Note: Plans in draft - work in progress.

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 GROUND FLOOR LOWER GROUND FLOOR

Note: Plans in draft - work in progress

Restaurant and bar
The ground floor bar/café will enjoy sidewalk access and seasonal outdoor seating, within sight of the High Line.
A grand staircase will lead guests to the lower ground floor destination restaurant.

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 BASEMENT -2 TYPICAL GUEST ROOM FLOOR

Note: Plans in draft - work in progress Guest Rooms and Suites

Contemporary and aesthetically designed, each room will feature bespoke
artwork curated for the hotel.

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 Indicative Development Costs
Hard Costs $50.4m
Soft Costs $17.4m
OS&E $2.0m
Pre-Opening Costs $2.0m
Land (including acquisition costs) $47.4m
Air Rights $16.6m
FF&E $6.0m
TOTAL $141.8m Site plan and aerial view
538, 540 and 542 West 29th Street, New York

Indicative Investment Split

Debt 60% $85.0m
Equity 40% $56.8m
Total Investment $141.8m
50%
Incoming JV Partner $28.4m
(on Equity)

Source: PPHE & advisors

CONFIDENTIAL 13
 Comparable hotels within the local area are limited, which underlines the great market opportunity for the proposed lifestyle hotel.

For the purpose of our indicative trading projections, we therefore took into account the occupancy and ADR levels of hotels offering a similar high quality
product, interior design, facilities range, room size and rating For example The Greenwich Hotel and Firmdale Crosby Street Hotel also feature a highly
appealing location for both leisure and corporate travellers, along with a comparable quality of design, facilities range and bedrooms.

Min. Meeting ADR (USD) Occupancy

Proposed Star Food & Beverage Meeting &
Keys Room Size Rooms Gym Spa Pool
Hotel Rating Facilities Event Space
(sqm) (sqm) 2021F 2022F 2023F 2024F 2021F 2022F 2023F 2024F

art'otel chelsea Destination restaurant

176 5 22 3 + art gallery 150 yes yes yes $486 $520 $546 $560 78% 82% 86% 86%
new york & bar, garden terrace

Min. Meeting YTD YTD Aug Aug

Competitor Star Food & Beverage Meeting &
Keys Room Size Rooms Gym Spa Pool 2017 2018 2018 2019 2017 2018 YTD YTD
Set Hotels Rating Facilities Event Space
(sqm) (sqm) (Aug) (Aug) 2018 2019
Destination
Gramercy Park 190 5 19 1 - yes yes no
restaurant & bar
Firmdale Destination restaurant 3 + screening
86 5 33 174 yes yes no
Crosby Street & bar with terrace room
Destination
The Mercer 74 5 23 - - no no no
restaurant & bar
Destination restaurant
The Greenwich 88 5 30 - - yes yes yes
& bar, 1 courtyard
74 - 190 5 19 - 33 $721 $732 $687 $712 79% 82% 79% 77%
YOY growth +3.0% +3.6% +1.5% -2.2%

Source: STR, PPHE

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 We expect art’otel chelsea new york to successfully compete within the Manhattan hotel market, given its strong product and facilities range, while
capitalising on its prime location.
For the purpose of the underwriting, we adopted a modest approach with regards to ADR projections and positioned the proposed hotel below the
competitor set, partly due to its larger bedroom stock. We project that by the third and stabilised year of operation, the proposed hotel will achieve an ADR
of approximately $485 at current year values (ie 2019 values) or $546 at future values. We believe this level to be easily achievable, if not exceedable,
given the competitors’ current ADR level in excess of $730.
We estimate a stabilised occupancy level of approximately 86%, which is above its competitor set, given the proposed hotel’s lower ADR level and ability
to attract a wide range of demand markets. We note that many hotels within Manhattan achieve annual occupancy levels well above 90%.

art'otel chelsea new york (US $ in Future Values) Based on benchmark of hotels
with comparable F&B facilities
Indicative Trading Projections 2023 2024 2025 2026 2027
in Manhattan and levels
Room Count 170 170 170 170 170 achieved at our existing hotels,
Occupancy 78% 82% 86% 86% 86% we project strong F&B income,
ADR 486 520 546 560 574 benefitting from the proposed
quality restaurant and bar
RevPAR 379 426 470 481 493
outlets, outside terrace, gallery
Total Revenue ($000s) 33,690 37,048 39,958 40,924 41,915 and conference/function space.
Rooms Revenue 23,522 26,532 29,138 29,866 30,613
Rooms Profit 17,280 19,903 22,161 22,736 23,326 Costs and expenses are based
F&B Revenue (including meetings & events) 9,410 9,706 9,962 10,182 10,407 on benchmark of comparable
hotels in Manhattan and levels
F&B Profit (including meetings & events) 2,303 2,424 2,517 2,583 2,652
achieved at our existing hotels.
Other Revenue 499 520 541 551 562 PPHE is well known, in
Other Profit 89 99 109 111 113 particular within the London
Miscellaneous Income 235 265 291 299 306 hotel market, for achieving
profit levels significantly above
Gross Operating Income ($000s) 19,907 22,691 25,077 25,729 26,397
the market norm.
Total Undistributed Expenses 6,087 6,441 6,760 6,916 7,076
Gross Operating Profit ($000s) 13,819 16,250 18,318 18,813 19,321 Our projections also take into
GOP(%) 41% 44% 46% 46% 46% account future market trends
and include management fees
FF&E Reserve (1%,2%,3%,4%) 337 741 1,199 1,637 1,677
for the operator (ie PPHE).
Net Operating Profit ($000s) 8,249 9,925 11,223 11,147 11,480
NOP% 24% 27% 28% 27% 27%

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PPHE Hotel Group, Sep’19