Soho House marked the end of its four-year spell on the Nasdaq this week after it reached an agreement to be taken private by US hotel giant MCR in a $2.7bn (£2bn) deal.
The swish members’ club, which was founded in Soho’s Greek Street by restauranteur Nick Jones in 1995, has grown into a sprawling hospitality empire over the past three decades, with dozens of venues and hotels across the UK, US and further afield, fuelled by investment from serial entrepreneur Richard Caring and American investor Ron Burkle.
In truth, the company’s stint on the Nasdaq has not been an altogether happy one – it has been loss-making for all of that time and, until the MCR takeover offer, its shares had been trading at barely more than a third of where they were following a 2021 IPO.
“Investors will have their work cut out to put Soho House back onto a more stable footing given concerns about the viability of its business model,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Its rapid expansion in recent years has sparked concerns that its ‘exclusive’ label was wearing thin.”
But now, new life can be breathed into the group by a US billionaire intent on following in the footsteps of his former boss by building a huge London property portfolio.
Billion-pound property collection
Last year, a flurry of midsize dealmaking in the London hotel property market was dwarfed by two massive deals worth a combined £1.1bn.
The first came in January, when Florida-based Starwood Capital acquired a portfolio of ten high-end venues, including in Kensington, Covent Garden and Oxford Street, from Edwardian Hotels for £800m.
The second followed soon after in February when MCR struck an agreement with BT to turn its iconic Soho communications tower into what would become central London’s tallest hotel.
While the transactions involved two separate US companies, there is more that links them than that meets the eye. That’s because MCR’s founder Tyler Morse was once the assistant to Barry Sternlicht, the billionaire behind Starwood.
Morse and Sternlicht
A former ski instructor, Morse began his career as an accountant at EY before moving to become an investment banker at Morgan Stanley. He then jumped ship into the hospitality world, working for Sternlicht.
Starwood was set up by Sternlicht (German for starlight) in the early 1990s, to snap up apartment buildings being offloaded in a hurry by failing banks during the US savings and loans crisis.
Barry Sternlicht, chief executive officer of Starwood Capital | Photographer: Zak Bennett/Bloomberg via Getty Images
The firm’s investments gradually expanded to include hotel chains and hotel real estate investment trusts, to build up a portfolio that is now thought to be worth more than $100bn.
Morse went his own way in 2006 to found MCR – and over the past two decades has built it up from a single hotel in Alabama into the third largest hotel owner in the United States by room count, with more than 25,000 rooms across 150 venues.
The London rush
It was not until around 12 years ago that Sterlicht started to take a serious interest in investing in the UK.
Sterlicht’s Starwood bought Principal Hotels in February 2013 for £360m, Four Pillars hotels in January 2014 for £90m and De Vere hotels in March 2014 for £323m. Principal has since been sold on.
In 2017, Starwood also bought a 30 per cent stake in London hotel group Yotel in a $250m deal. Starwood also helped finance the acquisition of Salesforce Tower, a 61 storey office block in the Square Mile.
Before last year’s BT Tower deal and this week’s Soho House takeover, Morse already had ties with the UK hospitality sector.
Morse’s MCR also owns two US hotels that are operated by the UK’s biggest hospitality group, FTSE 100 giant IHG: Staybridge suites in Chattanooga, Tennessee and Holiday Inn Express Scottsdale, Arizona.
Morse is also chairman of Optii, a hotel software company that is used by a host of British hospitality businesses including IHG’s luxury brand Crowne Plaza. Last year he also became a shareholder of Championship football side Swansea City.
The flurry of dealmaking means the two tycoons now control a combined 40 properties across the UK, of which more than two dozen are based in London.
And more may be on the way. “All of us at MCR are excited to be part of the Soho House journey… and we look forward to the continued growth of that fabric, starting with four new Houses opening soon,” Morse said on Monday.