Large Chinese Investors Pounce On Spanish Hotel Sector

27 April 2015 – Expansión

The Asian giant is taking centre stage / Since HNA acquired shares in NH, interest from Chinese investors looking to buy hotels in Spain and forge alliances with chains such as Melia and Barceló has skyrocketed.

The Spanish tourism sector has sparked significant interest amongst Chinese investors. Since HNA knocked on NH’s door for the first time in 2011, interest in investing in Spain has been unleashed. In recent years, hotel purchases by Chinese investors and alliances between Asian groups and major Spanish (hotel) chains, such as NH, Melia and Barceló, have exploded, as all parties look to explore opportunities in Europe and Asia.

In the past two years, China has invested more than €870 million in Spanish hotels and chains. Of that amount, €420 million relates to the funds disbursed by HNA to become the major shareholder of NH. The industrial conglomerate paid €234 million for a 20% stake in 2013 and last year, it purchased the shares owned by Amancio Ortega, owner of the textile empire Inditex, and Intesa Sanpaolo.

Furthermore, in 2014, Chinese investors signed five transactions to purchase hotel assets, including the deal between Barceló and Kangde for the Hotel Santiago in Tenerife (pictured above), which was agreed at the end of last year and signed in 2015.

Platinum

Out of all of these deals, the one that attracted the most media interest was Dalian Wanda’s purchase of Edificio España (Madrid) for €265 million. The intention of Wang Jianlin, who owns Wanda, is to create a residential, retail and luxury hotel complex. However, for the time being, Jianlin is focusing on the five-star hotel that he is preparing (to open) in London, where he will launch his Wanda brand in Europe.

Platinum Estates, the group led by the textile businessman Harry Mohinani and headquartered in Hong Kong, has closed two deals on a smaller scale. In February 2014, Platinum acquired the Estel building, in Barcelona (Telefónica’s former headquarters) for €56 million. In the autumn, it purchased Hotel Asturias (Madrid), near Gran Vía, from the Salazar family for €35 million.

The company plans to convert both properties into luxury apartments. According to experts in the sector, that is one of the keys to explaining the Asian interest in Spain, where foreign citizens are required to invest €500,000 in a residential asset to obtain a (resident’s) visa (known as the golden visa). Other factors include the measures promoted by the Chinese government to encourage investment overseas and the revaluation of the Yuan against the euro. Sources in the sector confirm that interest from Asian investors has increased, but they say that they do not seem to follow any particular investment pattern, and that, to date, they have focused on individual assets. Despite all of this, the large consultancy firms in the sector are optimistic about the potential of the Asian market – they have already recruited Chinese employees and are now preparing tours around the country to bring the two markets closer.

That is another one of the advantages that the alliances with Chinese groups offer the Spanish hotel chains. For example, NH will enter the (Chinese) market hand in hand with HNA. Both have created a joint company, with a Chinese majority, which will begin operating in 2015, when NH takes over the management of 6 of HNA’s hotels. In the case of Melia, the chain operates two hotels owned by its partner Greenland in China, and in 2014, it teamed up with the travel group Ctrip.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

Barceló Sells Hotel In Tenerife To Chinese Group ‘Kangde’

23 April 2015 – Expansión

Another transaction in the Spanish hotel sector has a foreign buyer. Barceló has sold the Hotel Barceló Santiago (in Tenerife) to the Chinese group Chongqing Kangde Industrial. Negotiations began in 2013, when Barceló and Kangde signed a framework agreement to explore options together.

After more than a year of meetings, the Spanish tourism group agreed the sale of the property to Kangde. According to the Chinese group’s website, the alliance was signed during Lu Chaokang’s tour of Europe in search of investment opportunities. Chaokang, the Chairman of Kangde, visited a dozen projects in Budapest, Madrid, Barcelona and the Canary Islands.

Consideration of €50 million

The sale, which amounted to around €50 million, has not been formalised yet, as the buyer is still waiting to receive approval (of the purchase) from the Chinese government. The deadline for obtaining the backing ends in May. Nevertheless, according to industry sources, Barceló has already received confirmation that the transaction will close on time.

The Spanish chain will continue to manage the four-star hotel, which has 406 rooms and is located close to the Playa de los Gigantes. However, Kangde may be interested in renovating the property and increasing its (star) rating. In 2006, Barceló invested €7 million in the refurbishment of Hotel Santiago, which entered its portfolio in 1995. The sale of the hotel forms part of the process designed by Barceló to reduce its exposure to real estate, which has reached a historic high – (it owns) almost 63% of all of its rooms. The major milestone on this roadmap has been the creation of the Socimi, Bay, together with Hispania. Barceló will transfer 16 hotels and two shopping centres worth €421 million to the Socimi and whereby reduce the percentage of rooms it owns to 43%.

In 2014, Barceló recorded a profit of €46.4 million, up 85.6% on the previous year and a turnover of €2,056.6 million.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake