Oaktree Capital Management is exploring a £500m sale of its SACO serviced apartments business.
A sale by the private equity arm of Oaktree would be a litmus test for the UK serviced apartment sector that has yet to see a sale of such magnitude.
Serviced apartments provide consumers an offering between hotels and traditional residential lettings, including discounted rates for longer stays and amenities such as kitchens and concierge services.
Disposing of SACO is understood to be the most likely outcome but Oaktree is also considering a refinancing of the business.
It has 39 operations throughout the country. Nine of these buildings, totalling 1,200 rooms, are owned freehold and operated under its design-led “lifestyle” Locke brand that aims to appeal to millennials. The remainder are leased assets and branded as SACO.
Additionally, there are more than 900 rooms in SACO’s development pipeline that will be owned freehold and branded Locke once they are completed. As well as one site in Manchester and three in London, this includes an international expansion to Dublin and Amsterdam.
Also on offer to prospective purchasers is SACO’s online platform, an Airbnb-style agency that serves third-party private owners and other serviced apartment businesses. It hosts a further 900 apartments across the UK, as well 30,000 rooms globally.
Oaktree entered the serviced apartment business in the UK in 2013 when it backed Central London Serviced Apartments to buy sites in the capital.
In 2015, it bought the then Bristol-based and privately owned SACO and merged it with CLSA. Since then, its expansion has been focused on acquiring freehold properties and most of the previous leasehold properties in its portfolio were acquired prior to the merger.
Operationally, SACO is run by chief executive Stephen Hanton, the former managing director of serviced apartments business Bridge Street. It was previously run by Max Thorne, who joined JLL in March last year to head up its specialist serviced apartments business.
Oaktree is looking to cash in on a number of UK investments it made across both its private equity and property strategies in 2012 and 2013, in order to return cash to investors into its maturing funds.
The firm is actively in the process of selling five business parks valued at around £1bn, including Winnersh Triangle near Reading, Berkshire, as well as a £120m portfolio of three shopping centres it acquired through loan portfolios that included the Vancouver Quarter in King’s Lynn, Norfolk.
It also holds stakes in businesses including lender Titlestone and a circa 23% share in listed housebuilder Countryside Properties.
UK property assets still on its books include 100 Barbirolli Square in Manchester, alongside Moorfield, and Maxis business park in Bracknell, Berkshire, alongside Hines.
Eastdil Secured is advising Oaktree.
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