Mandarin Oriental Munich to undergo expansion

Mandarin Oriental Munich to undergo expansion

Mandarin Oriental International is planning to expand and enhance its wholly-owned hotel in Munich through the construction of a mixed use complex on an adjacent site.

The Group has entered into an agreement with the project developer Wöhr + Bauer to construct new hotel rooms and facilities as part of the mixed use complex estimated to open in 2021. 

The Group’s total investment in the project, which will also include a refurbishment of the existing hotel’s 73 rooms, is estimated at €124 million.

The site will be developed into a mixed use complex of some 23,000 sq. m. comprising two buildings that will jointly house new hotel rooms and facilities, 19 luxury branded Residences at Mandarin Oriental, retail units, commercial offices and underground car parking. 

One of the new buildings, housing the hotel rooms and facilities as well as six of the 19 Residences at Mandarin Oriental and approximately 800 sq. m. of retail, will be connected to the existing hotel via an underground tunnel.

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Mandarin Oriental will own 100% of the freehold interest in the land and buildings of the new hotel annex, comprising 51 additional guestrooms (increasing the total number of guestrooms of the expanded hotel to 124), a restaurant and bar, a spa, fitness centre and swimming pool, hotel back of house facilities and ten underground car parking spaces. 

Mandarin Oriental will manage the expanded hotel, as well as brand and manage the residences.  W+B will retain and manage 100% of the freehold interest in the remaining land and buildings, comprising 19 Residences at Mandarin Oriental, a third party operated restaurant, commercial offices, retail outlets and underground car parking.

The site, which is currently a multi-storey car park, was acquired by W+B from the City of Munich in 2013.  As a condition of the purchase of the car park, W+B are required to develop and construct a replacement car park at another location in the city prior to commencing redevelopment of the site.  As a result, construction of the complex is estimated to begin in 2018, with completion expected for late 2020.

Mandarin Oriental will pay the developer, W+B, a turnkey construction price to build the new hotel rooms and facilities, a portion of which will be subject to indexation.  Mandarin Oriental will provide technical services to the developer.  Mandarin Oriental’s financial commitment during the period 2014 to 2017 is limited to development fees and land purchase price instalments, estimated at €17 million (US$23 million), with the final land purchase price instalment only due when construction on the site commences.  Refurbishment of the existing hotel rooms will be undertaken during the construction period.

The expanded and enhanced hotel operations are currently estimated to generate incremental EBITDA (earnings before interest, tax, depreciation and amortization) in 2023 (expected third year post opening) of US$17 million, in today’s terms.  Mandarin Oriental will fund the estimated €17 million (US$23 million) of payments leading up to the final land purchase price instalment and commencement of construction using existing cash reserves, with the remaining investment to be funded through the use of an appropriate mix of external debt and cash reserves.

Edouard Ettedgui, Group Chief Executive of Mandarin Oriental, said, “This project creates a rare opportunity to expand one of Mandarin Oriental’s best performing assets, and further strengthen Mandarin Oriental, Munich’s market leading position in this strategically important German city.”