Tata Group checks out of Taj Boston Hotel for ₹839 crore

Move will help Indian Hotels Co reduce debt

MUMBAI: Tata Group-owned Indian Hotels Co Ltd (IHCL) has sold the 90-year-old Taj Boston Hotel in the US to a consortium of private equity and real estate development firms for $125 million (around ₹839 crore), lower than the price at which the Tatas bought the historic hotel in 2006.

Proceeds from the sale will be used by IHCL to reduce its debt of around ₹4,386 crore.

IHCL bought the 273-rooms Ritz-Carlton-run luxury hotel from Milenium Partners, for $170 million (₹765 crore) in November 2006 and renamed it Taj Boston. It was similar to the expensive acquisition that group company Tata Steel did in 2007, when it paid $13 billion to buy UK steelmaker Corus. Tata Steel has been looking to sell its UK business.

“Taj Hotels will retain its brand presence in Boston through a long-term management services agreement. As part of the transaction, New England Development, Eastern Real Estate and Highgate will serve as asset managers working closely with Taj Hotels Resorts and Palaces team, Rockpoint Group and Lubert Adler,” Taj Hotels said in a statement.

For the Tatas, the agreement was done by United Overseas Holdings, a wholly-owned subsidiary of IHCL.

Taj Boston is a landmark in the Back Bay skyline of the city, adjacent to the city’s premier retail district. The Tata Group had bought it to boost its presence in the US. However, after the Lehman Brothers crisis in 2008, leisure as well as corporate travel took a hit in the US. IHCL’s US-based properties, which besides Boston includes Pierre in New York and Campton Place in San Francisco, has been a drag on its balance sheet. For the year ended March 31, 2016, IHCL reported a consolidated loss of ₹61 crore, compared to ₹378 crore a year ago.

“The US remains an important market for us and we are committed to our presence, which we have built over the past decade in cities like New York, San Francisco and Boston,” said Rakesh Sarna, managing director and CEO, IHCL.

The company had received board approval in May this year to sell the Boston hotel for at least $125 million. Analysts welcomed the deal. “It (Taj Boston) was a lossmaking investment, not giving shareholders any returns. IHCL had been trying to turnaround the hotel for last seven to eight years, without success. Therefore, exiting the property is the best strategy,” said an analyst with a large investment bank.

Earlier this month, IHCL sold 5.1% stake in Belmond Ltd (formerly Orient Express Hotels) for $50 million. Coupled with the sale of the Boston hotel, it will help reduce IHCL’s debt by a fourth — around ₹1,170 crore.

“As they start selling properties, earnings will start looking better as losses will reduce and it will free up capital for use elsewhere,” said the analyst quoted above.