Financial Times: Patron Capital plans 940-bed Paris hostel

Patron Capital, the private equity owner of Powerleague soccer, has stepped up its push into European property with an ambitious move to build the largest youth hostel in Paris.

generator-logo-rgb-largeThe London-based group, among Europe’s most expensive real estate funds for the past year, is set to confirm the Paris site purchase and project on Tuesday as part of a €70m spree that includes a hostel in Rome.

Both buildings will be managed by Generator, the hostel chain owned by Patron.

The decision to develop the 940-bed hostel, which will be among the largest in Europe, underlines the popularity of low-cost accommodation and student housing among private equity investors. The private equity industry is increasingly looking beyond the rebounding and highly competitive office and retail property markets in an attempt to generate higher returns.

Josh Wyatt, director of hospitality and leisure at Patron, said the developments, which will include nightclubs and cinemas, were aimed at cashing in on the booming market in “sophisticated young travellers”.

The Paris deal comes a month after Patron’s founder, Keith Breslauer, said the company would spend up to €500m in France on expectations that liquidity would retreat from the country under President François Hollande’s socialist government.

“There is a lot of uncertainty going around the property industry about the tax situation, the political situation and the impact both of those things will have on the economic future,” he told the Financial Times. “The upshot has been to take a lot of liquidity out of the French market, so there are a lot of opportunities if you are willing to take a contrarian view.”

Mr Hollande is pushing through €20bn of tax increases this year as he grapples with reducing a budget deficit overshoot. He has raised capital gains tax on property and sharply increased wealth taxes on large fortunes.

Though his plan for a 75 percent top marginal income tax rate was struck down by the constitutional council at the end of last year, Mr Hollande is committed to raising taxes on the wealthiest.

The depth of concern caused by the stance was underlined this year when Axa Real Estate, the largest manager of French property assets, said it would reduce its exposure to the country over fears it was becoming a “middle of the pack” economy.