Controversial RBS Arm Targets Jupiter Exit

A hotel chain part-owned by Royal Bank of Scotland (LSE: RBS.L - news) 's (RBS) controversial property investment arm is being groomed for a sale that could value it at up to £100m.

Sky News understands that Jupiter Hotels, which trades under the Mercure brand in the UK, is to be auctioned next year by the property agent CBRE.

Jupiter is a 50-50 joint venture between West Register, a division of RBS which has been wracked by repeated debates over its activities since the bank's taxpayer bailout, and Patron Capital, a private equity firm.

The portfolio of 26 Mercure sites, which are operated under a franchise agreement with Accor (Paris: FR0000120404 - news) , the brand's French owner, was largely acquired from administrators to Jarvis Hotels in 2011.

In addition, Jupiter, manages five properties using the name Choice Hotels, and one independent hotel.

The sale process, which is likely to begin in the next few months, will form part of a process of winding down West Register, which has attracted close scrutiny since RBS was rescued with £45.5bn of taxpayers' money in 2008.

Earlier this year, a report by the City law firm Clifford Chance concluded that West Register "operated largely in an open market process and with strict internal controls".

"However, RBS acknowledge there was a damaging perception that the bank had a conflict of interest when it purchased a property as part of a restructuring process, despite the fact that West Register has only successfully bid for property owned by 166 SMEs (small and medium-sized companies) in the last five years.

"The bank has taken the decision to wind down and sell any assets in West Register."

Sources said that CBRE had not yet been formally appointed to handle the sale but suggested that the agent would be shortly.

Spokesmen for RBS and Patron declined to comment on Thursday.