Liverpool-based Sanguine Hospitality burst onto Birmingham’s property scene last December, announcing three major leisure projects in as many weeks. Until then, the hotel management and development company, which had established itself in the North West and South West of the country, was a little-known name in the Midlands.
That changed in early December when news broke that Sanguine and celebrity chef Marco Pierre White are to debut in the city at The Cube mixed-use development (see box, p109).
Seven days later, Sanguine announced it had won the management contract to operate a Hampton by Hilton hotel at the revamped Cumberland House on Broad Street, which will be Hampton by Hilton’s first office conversion into a hotel in the UK. A week later, all eyes were on Sanguine once again when it confirmed it was in talks with Bruntwood to transform the outdated Kennedy Tower office block, which forms part of the Snow Hill Plaza scheme, into another hotel for the city. In total, the firm reckons it has invested £1m in the Kennedy Tower and Cube projects.
So what is Sanguine, and why the sudden interest in Birmingham?
Started six years ago, the company has its roots in the North West. Although several national hotel agents contacted by Estates Gazette knew of the brand, they were not familiar enough to be able to comment.
Sitting in a cold but immaculate show apartment within The Cube, Simon Matthews-Williams, the chairman of Sanguine, says the company’s arrival in Birmingham is down to a combination of factors: “Outside London, one wants to be in both Manchester and Birmingham. They are innovative and dynamic cities. The hotel offer in Birmingham is good, but there’s room for improvement. Birmingham has only two boutique hotels – the Malmaison and Hotel du Vin – so Indigo at The Cube should stir things up a bit.”
The 50-year-old, married father of four says the firm is “making hay while the sun shines. We’re opportunity-led”. Sanguine has ramped up its activity recently due to the availability of decent properties at affordable prices. The firm is also taking advantage of the government-backed Business Premises Renovation Allowance, a tax-incentive-driven initiative to bring derelict buildings back into use.
Matthews-Williams explains: “The BPRA scheme is vital in this brutal world of securing bank debt. The good things about refurbishments are that they are lower risk and they are quick to complete. Structured with tax breaks, we make it very attractive for banks to invest.”
Owing to an historical anomaly, much of Birmingham city centre qualifies for the scheme, which has driven up the number of hotel conversion proposals in the past year. However, with BPRA due to finish in April 2012, Sanguine is considering how best to move forward with new projects.
Matthews-Williams admits: “Our opportunity pipeline will definitely slow down.” With the three Birmingham projects expected to be up and running by the end of next year (see box above), landlords of derelict buildings across the West Midlands hoping to interest Sanguine in a deal may be disappointed. It has no intention of considering locations anywhere else in the region, or indeed any more schemes in central Birmingham. Matthews-Williams concludes: “We’ve got enough to be getting on with for the foreseeable future.”
Company history and financials
Sanguine Hospitality was formed in November 2005 by Simon Matthews-Williams and Paul Bolton, although it is Matthews-Williams who effectively controls the company. The company manages £100m of assets. It has agreements in place with Marco Pierre White to development restaurants alongside hotels, such as Hilton, Days and Intercontinental Hotels Group – owner of the Indigo, Holiday Inn Express and Crowne Plaza brands.
According to the latest abbreviated accounts filed at Companies House for the year ending 31 March 2010, Sanguine had fixed assets of just over £4m (up from £2.7m seven months earlier), but reported a deficit of nearly £0.9m (down from £3m seven months before).
Management accounts to the end of 2010 show pretax profit of £0.5m, based on a turnover of £1.3m.
Individual hotel properties are set up or built in special property ventures, and overseen by Sanguine’s in-house hospitality management company.
Sanguine’s cash reserves are low (just £3,961 in the bank last March), but the company benefits from flexible terms from its debt provider.
Matthews-Williams invests personally in Sanguine by increasing his loan stock in the company. The hotel sector entrepreneur sold his 50% stake in Liverpool-based Centre Island Hotels in 2003 for £5.5m, and now has personal wealth estimated at £9m (Liverpool Daily Post: Fortune 50).
How Sanguine works
Sanguine Hospitality is primarily a hotel management company. Matthews-Williams explains: “Our business model is to generate management contracts. An example of this is Cumberland House, where we are working with our funding partner Downing Corporate Finance and developer Office Villages. We facilitated the deal with Hilton, and persuaded it to allow Cumberland House to be a conversion – it’s easier to raise finance and the tax breaks are a bonus. Stephen Bantoft at Office Villages found the site, we found the brand and Downing provides the finance.”
Although Sanguine has also taken on the role of developer for some schemes, the company has no plans to branch out in this direction. Matthews-Williams says: “We will be a procurement and management company, taking a strategic investment where necessary – as at, for example, The Cube. In the embryonic stages of a project, Sanguine funds all feasibility work, including planning and franchise application.”
The company’s main funding backer is London-based Downing Corporate Finance, which specialises in partnering entrepreneurs and invests on behalf of a network of high-net-worth individuals. Downing has a 20% stake in Sanguine. Sanguine is also doing deals with Guernsey-listed Blackmore Commercial Properties. Matthews-Williams says: “Our role there is to find sites for it to build and we will manage them.”
