Funds Snatch Leadership in Hotel Investment from Socimis

2 November 2017

The Spanish sector is experiencing its moment of glory this year. Forecasts indicate that the number of visitors will reach 80 million, a record that will place Spain ahead of France in the rankings. This, added to the positive operational data coming from the hotels, has led investment funds to intensify their commitment to hotel assets, taking the lead from socimis as the principal investors in the sector. Thus, compared to last year, the disbursement of funds to acquire hotel establishments or platforms has grown by 119%, to exceed €1.25 billion at the end of October, compared to 569 million that was transacted throughout 2016.

In the same period, the socimis have decreased their activity by 76%, going from being the leading investor in the area last year, with 26.3% of the total investment amount, to accounting for only 5.26% of the total disbursed by the end of October this year, according to JLL’s data.

The leadership of the socimis in recent years has been buoyed by Hispania’s intense activity, which in just three years has managed to position itself as the principal non-operating owner of hotels in Spain, with 11,296 rooms spread over 39 establishments. The company owned by George Soros has until the end of the year to continue to increase its portfolio, and as explained Javier Arús, the socimi’s director of investments in the hotel segment, it has 200 million euros for new purchases during this period.

However, another socimi, Foncière des Régions, starred in the most significant operation of last year. The French company took over Merlin Properties’ hotel portfolio for 539 million euros, and positioned itself as the primary investor of 2016, snatching at the last moment the title from the platform HI Partners (HIP), which at that time still belonged to Sabadell and had closed operations for a volume of just over 223 million euros. This year, the firm has slowed down a bit and to date has paid out 179 million for new assets.

In 2017, however, the funds have been the undisputed leaders, and Blackstone has managed to position itself first by buying, precisely, HIP for €630 million, attracted by its mainly tourism-based portfolio. With this, the fund retained the necessary structure to manage other hotel assets that it already had in its portfolio, such as those of Banco Popular and future acquisitions that could be made in other countries such as Italy and Portugal.

KKR is another of the funds that have moved into the market by purchasing the Mallorcan chain Intertur Hotels together with Dunas Capital. Its portfolio of five hotels will be managed by Alua Hotels & Resorts, which is backed by another fund, the British Alchemy Special Opportunities. The also British Benson Elliot entered the hotel rankings at the beginning of the year with one of the most sizeable operations of 2017, when it acquired the hotel Silken Diagonal, in Barcelona, for 65 million euros.

On the other hand, the activity of private investors has been growing year after year, with an increase of 78% over the last two years, nearly assuming the dealership position, only losing out to investments funds after Blackstone’s operation.

Original Story: – Alba Brualla

Translation: Richard Turner