Who Are The New Advisors In The RE Sector?

8 June 2015 – Expansión

The ‘big four’ audit firms and the investment banks are starting to advise on deals in the property sector, where specialist firms, such as Aguirre Newman, CBRE, JLL and Knight Frank, have been operating for more than 30 years.

Specialisation versus multi-disciplinary teams. The real estate investment boom in Spain is attracting both specialist consultancy firms and new players from the world of audit and banking. All of them are competing to advise on the major property transactions, both on the purchase and sale of companies, as well as of individual assets. This market saw investments reach €2,500 million during Q1 2015.

The large specialist consultancy firms arrived in Spain three decades ago. Having established themselves in the Anglo-Saxon markets, they were looking for other markets to advise companies and investors in their search for properties and land.

Such was the case of Jones Lang LaSalle (now JLL), Richard Ellis (now CBRE) and Knight Frank, which still lead the market for consultancy and transaction advice, together with a Spanish company: Aguirre Newman. The latter, created by Santiago Aguirre and Stephen Newman, is the only Spanish firm that competes with the multi-nationals to advise on large transactions.

Besides these four large firms, there are other international companies such as BNP Paribas Real Estate, previously known as Atisreal, Savills, Catella and the US firm Cushman & Wakefield.

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Now, the RE teams from the large auditors – known as the big four – are entering the market. They have strengthened their teams in recent months, hiring staff from the real estate consultancies, and are taking advantage of the synergies they can offer with other departments (legal, tax, financing) to secure advisory contracts….Many international investors prefer this one-stop-shop model, especially when they are in a hurry to close a deal.

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In this way, PwC has just advised on one of the largest transactions in the RE sector, the sale of the Ritz Hotel in Madrid (pictured above). PwC acted on the buy-side, advising Mandarin Oriental, whilst the vendors – Omega Capital (Alicia Koplowitz’s investment company) and Belmond (formerly Orient-Express) – worked with JLL. PwC has also advised on other recent transactions, such as the sale of the Plenilunio shopping centre to Klepierre.

Meanwhile, Deloitte Real Estate advised the US fund Tiaa Henderson on its purchase of the Islazul shopping centre in Madrid for €230 million, as well as on the sale of a batch of office buildings to the largest Socimi in the market, Merlin Properties. KPMG’s RE team is working with Credit Suisse to jointly advise Bankia on the sale of its Big Bang portfolio, the largest RE asset portfolio seen to date. It also advised Cerberus Capital and Orion Capital Management of their purchase of 97% of Sotogrande, amongst others.

The investment banks are also competing well with the consultancy firms and the big four, especially on the larger deals. They tend to receive buy-side or sell-side mandates for individual buildings and companies with asset portfolios.

In this way, N+1 is currently working with Popular on the sale of a RE portfolio, known as Project Elcano, worth €415 million. It is also working with Sareb on the disposal of part of the Polaris World portfolio.

Nevertheless, although there may be cases in which an investment bank works by itself on a RE transaction, the work performed by the large firms and the consultancies is usually complementary. The banks provide the financing and structuring advice; the RE consultancies value the assets.

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Original story: Expansión (by G. Martínez, D. Badía and R. Ruiz)

Translation: Carmel Drake

Mandarin Oriental Enters The Bidding War To Buy The Ritz

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

Recession Hands Over a Bill to Hotel Ritz

12/11/2014 – Cinco Dias

The economic crisis and the decline in the number of visitors coming to Madrid over the past years have deeply undercut the value of one of the most iconic hotels in the capital city. El Ritz by Belmond is 50% owned by Omega Capital, an investment vehicle of businesswoman Alicia Koplowitz, and chain Belmond, until recently known as Orient-Express Hotels. In the last three years, the brand value dipped from €22.9 million down to €10.9 million.

Auditor’s report on the Hotel Ritz Madrid company 2013 balance by PwC reveals that the 2011 and 2012 reporting included a caveat that incomplete data was accessible to verify correctly the brand’s value, ‘albeit the 2014 study provided us with an independently conducted valuation (…) indicating a €9.84 million loss’.

Hotel Ritz Madrid, directly operating the Hotel Ritz, registered a net revenue of €1.98 million in 2013, compared to the €3.3 million loss from a year earlier. The proceeds were intended for reducing the red from the previous years, showing a hole €46.15 million deep as per December 31st 2013.

PwC assures that the firm neither inclines towards dissolution nor ‘mandatory capital reduction’, in spite of negative working capital posting €62.16 million at the end of 2013, not considering the payables with its shareholders, and a negative net equity of €3.5 million. However, the auditor warned about ‘uncertainty about further operating capacity of the company’. From January to April 2014, Hotel Ritz Madrid met the financial liability agreed upon with the creditor banks and its two stakeholders injected €6.9 million in cash, loans of a participative nature at a 3.05% annual interest rate. In 2013, another €7.5 million was put in, and in 2012 €6.2 million more. Omega Capital and Belmond hold loans and credits amounting to €38.4 million.

At the end of 2013, the company owed €61.8 million to the banks and the Hotel Ritz was a collateral at the giant NPL portfolio ‘Octopus’ sale by Hypothtekenbank Frankfurt AG earlier this year. Throughout 2012, the establishment was thoroughly refurbished with view to ‘improving revenues in the next years’.

Omega Capital and Belmond bought the Ritz in 2003 for €125 million. Currently up for sale, the establishment called attention of such big-name brands as Marriot and Fairmont.

 

Original article: Cinco Días (by L. Salces)

Translation: AURA REE