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12 February 2015 – Cinco Días
A new chapter has begun in the bidding war to buy the Ritz in Madrid, one of the most emblematic hotels in the capital. The property has been on the market for almost two years, but may have a new owner in a matter of days. Mandarin Oriental, one of the largest Asian luxury hotel chains, has set its sights on the hotel, which is currently controlled by Orient-Express and Omega Capital, the investment company owned by Alicia Koplowitz.
The owners of the Ritz have been looking for a buyer for the property for almost two years, which, despite its prime location and the power of its brand, has lost much of its appeal in recent years, due to a lack of investment. This has meant that all of the operators that have shown an interest in acquiring the property have identified the need to undertake a major refurbishment, which has played against a quick sale.
Despite that, Orient-Express, now known as Belmond, and Omega have remained steadfast in their price expectations, which led Marriott to placing an offer for €130 million on the table; the transaction fell through at the last minute, when it seemed like every blessing had been given. The problem was that, by adding the purchase cost to the amount required to reform the property, the buyer considered that the final result was infeasible.
Fairmont took over the reins in the bidding process during the second half of last year, by offering €120 million for the property, whose refurbishment it valued at around €60 million. The luxury hotel chain analysed all kinds of options to try to close the transaction successfully, ranging from reselling the rights of the Ritz brand to Marriott – which would have allowed its rival to use the brand throughout the Iberian Peninsular – to addressing the possibility of operating the asset under its second brand, Raffles.
But, according to several market sources close to the negotiations, Fairmont has now also withdrawn from the bidding, leaving the way open for Mandarin. The Asian player may end up closing this complex transaction, mediated by JLL, through an agreement whereby it takes on a management role, but which, in any case, will allow the Asian chain to establish itself in Madrid, a market that it has been analysing with much interest for over a year.
After acquiring numbers 38 and 40 on the exclusive Paseo de Gracia in Barcelona, overlooking Casa Batlló, the Hong Kong firm opened its first property in Spain at the end of 2009. With this investment now well established, the Asian hotel chain has plans to grow in the country, both in Barcelona and, above all, in Madrid.
Luxury hotels arrive in Madrid
The emergence of Four Seasons in the capital, which has reached an agreement with OHL Desarrollos to open the luxury Canalejas complex, has been a catalyst for the Madrilenian hotel market. The large international chains have set their sights on the city and deals are expected to be signed for properties such as the Hotel Villa Magna, the Hotel Miguel Ángel and the old headquarters of Asturiana de Minas; without forgetting the Edificio España, which was acquired by the Chinese Group Dalian Wanda.
These deals will follow others agreed in the last few months, such as the opening of Barceló’s four star hotel in the Torre de Madrid, the conversion of the Hotel Asturias into a boutique hotel and the transformation of the historical Tio Pepe building into a 5 star hotel.
Omega Capital and Belmond acquired the Ritz twelve years ago for €125 million. The strong impact of the economic crisis on the hotel sector in the capital, with declining tourist numbers and low prices, in addition to the cost of the pending renovation of the emblematic hotel, has taken its toll on the brand, for which an impairment loss of €12 million was recorded in 2013, the last full period for which official results are available.
Original story: Cinco Días (by R. Ugalde)
Translation: Carmel Drake