KKH Has Spent €500M+ In Spain & Wants To Invest More

17 July 2017 – El País

After the abrupt collapse of the real estate sector following the burst of the bubble, it was five years before capital returned to the industry. And it did so five years ago, when the recovery in the sector was based essentially on investment funds with foreign names, which bought anything ranging from portfolios of properties from the administrations to buildings that were weighing down heavily on the banks. One of the funds that arrived then was the KKH Capital Group. Rather it made its return to Spain then.

The instrument was led by the person who until 2007 had been the CEO of Renta Corporación, Josep María Farré. He returned to Spain after a six-year break with the intention of building a portfolio of properties exceeding €300 million. Five years later, and after joining the US fund Perella Weinberg, the resulting alliance, KKH Property Investors has now spent €500 million and is considering expanding its financial muscle to continue acquiring buildings.

After undertaking acquisitions in Barcelona and the Balearic Islands, KKH recently entered the Spanish capital. There, it purchased the former headquarters of the Caja Madrid Foundation, in Plaza de las Descalzas, which it is going to convert into a 170-room luxury hotel. The building, which has a surface area of 25,000 m2, spread over seven floors and another two parking floors, could be operational by 2019 (…).

Buying and renovating

This acquisition fits perfectly into the company’s business model, which, unlike other funds, does not just sit back and wait for its properties to appreciate in value, but rather seeks to increase their value through renovation and, in most cases, changes of use. On paper, the model is similar to that employed by Renta Corporación, but sources in the sector highlight a significant difference: the real estate company used to try to hold onto properties for the shortest time possible. When the crisis hit, that logic became impossible.

The same operation that it undertook in Madrid – the transformation of a property into a large luxury hotel – was frustrated in Barcelona with the election of Ada Colau as mayor of that city. The group had acquired the iconic Deutsche Bank building, on Paseo de Gràcia, for around €90 million, according to market sources. That establishment was going to be managed by Four Seasons and was going to be another magnet to attract new investment to the area. In parallel, KKH was developing other hotels in the city. For example, it is still planning to open an establishment close the Santa Caterina market, under the Edition brand from Marriott International and the businessman Ian Schrager, by the end of this year.

Not in vain, hotels are one of the most sought-after assets at the moment, given the pull of the tourist sector. According to the consultancy firm CBRE, last year, investors spent €1,706 million on these assets in Spain after a record year in 2015, when they spent more than €2,000 million.

Nevertheless, when Colau’s team came to power, KKH withdrew from the hotel after her party opposed the project during its campaign and decided to build luxury apartments in its place. Barcelona’s new hotel plan, which prohibits new openings in the centre, has forced the fund to shift its focus. “New hotel projects in Barcelona are complicated. The areas where they can be built are not ideal for such use, but we have the vocation to continue operating in the city. We will adapt to the political situation and I am sure that we will continue”, said Enric Venancio, CEO at KKH. He added that besides Madrid, another key destination for the firm is Ibiza, where it started work last year on the construction of a luxury establishment.

In addition to hotels and luxury homes – (…) this fund has a third string to its bow, in the commercial segment. In an unprecedented operation in the Catalan capital, the fund is immersed in the conversion of the former Montecarlo hotel, on La Rambla, into a commercial space. (…).

Original story: El País (by Lluís Pellicer)

Translation: Carmel Drake

JLL: Global Inv’t In Hotel RE Reached €38,590M In H1 2015

18 August 2015 – Cinco Días

Hotels have become a very desirable haven for investors. Private and sovereign funds and hotel chains are all committed to boosting these purchases. In fact, according to a report by the real estate consultancy JLL, a “new historical high” was reached during the first half of 2015, as acquisitions amounted to €37,590 million.

“All indications show that 2015 is going to be a record year for hotel transactions at the global level”, says JLL in a statement, “driven by significant overseas investment”. During the first half of 2015, the largest volume of transactions was recorded on the American continent, with €21,490 million changing hands in total – that figure reflected an increase of no less than 73% YoY. Next in the ranking was EMEA (Europe, the Middle East and Africa), with an increase of 55% to €13,430 million.

The consultancy had predicted that the volume of transactions in the hotel sector would amount to €60,870 million in 2015. “We have already reached 60% of that figure during the first half of the year, and so if the level of activity continues into the second half of the year, then we may actually exceed our original forecast”, say JLL.

“The clear improvement in the main hotel markets in Europe and USA, the general economic recovery and the availability of debt with interest rates at historical lows are some of the drivers behind the increase in the level of investment at the global level in 2015, strengthening the trend that began in 2013”, explains Carlos Ortega, Vice-President of the JLL Hotels & Hospitality Group.

Although US private equity firms continue to be the main source of capital, the number of transactions involving investors from mainland China and the Middle East increased significantly during the first half of 2015 – their contribution to the global hotel real estate sector amounted to €8,775 million, compared with €2,060 million a year earlier.

The major transactions closed so far this year have involved several sovereign funds, such as the Abu Dhabi Investment Authority, which acquired the Grand Hyatt in Hong Kong, the Reinaissance Harbour in the same city, and the Edition in New York. The largest sale was closed by the hotel chain Hilton, which sold the Walforf Astoria in Manhattan for €1,745 million.

These investors are looking for trophy businesses, in other words, iconic buildings in large cities that guarantee high returns and have secure customer bases. “Europe, with Paris and London as the major capital cities, continues to be one of the best destinations for agreements involving trophy assets, and hence is where the Middle Eastern sovereign funds continue to show most interest”, says Ortega.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake