Meliá Weights Up Alliance With Starwood Capital to Bring Sol Back to the Market

11/12/2014 – Expansion

Melía Hotels International is going to kill two birds with one stone: sell some assets and team up with a large international fund, Starwood Capital. The parties are in talks on a deal including six to eight holiday resorts located in the Balearic Islands, the Canary Islands and in Andalusia.

The off-market operation has been forged over the last months, originally involving a 12-asset portfolio. Even though the number has decreased, total value of the deal may post between 125 and 150 million euros and include hotels like the Sol Ibiza and the Pinet Playa (Ibiza), the Sol Lanzarote, the Sol Mirlos Tordos (Majorca) and the Sol Principe (Torremolinos).

When it comes to Starwood Capital, advised in the process by CBRE, the operation would be its second large conducted in Spain in less than two months, after it acquired an 800 million euro loan portfolio from Bankia, together with Sankaty.

In turn, Maliá would meet or even outperform its promise to sell assets for at least 100-125 million euros throughout 2014. The chain controlled by Escarrer family will maintain a minority shareholding but it would cut in debt and keep management of the establishments. At the end of the third quarter, Meliá had 1.097 million euros of liabilities.

Likewise, the alliance with Starwood would enable Meliá to advance in its project on moving to the south-east from Palma de Mallorca. In 2011, the chain ran a pioneer strategy to put an end to low-cost tourism and create an eight-hotel complex offering more than 5.000 keys in total.

To implement the project, called Sol Calviá Resort, Meliá created a joint venture with Evertaas, a Dutch company with British equity.

Starwood Capital took to the strategy of reviving establishments in famous tourist spots. Once the agreement signed, the fund will finance modernization of the purchased units. Brand Sol operates in 72 three- and four-star hotels and holiday apartments in six countries: Spain (38 establishments, 10 of which stand in Majorca), Croatia, Cuba, Bulgaria, Egipt and Bali.

In 2014, there have been several noteworthy operations in the Spanish hotel industry. For instance, iconic Hotel Renaissance in Barcelona was sold for 78.5 million euros de euros, or the purchase of Katara Hospitality, the Hotel InterContinental in Madrid for 70 million euros. Likewise, inside the chains, back in June Meliá disposed of 261 apartments from the Hotel Sol Aloha Puerto (Torremolinos) for 20.8 million euros, while NH transferred its real estate affliliate Sotogrande for 225 million euros and auctioned its Hotel Amsterdam Centre.

In the first nine months of 2014, an amount of 800 million euros was spent on hotels in Spain, reports consultant Aguirre Newman. Of these deals, 38 percent was invested by operators, 21 percent by investment funds and 7 percent by family offices.


Original story: Expansión (by R. Ruiz & Y. Blanco)

Translation: AURA REE