Madrid Gets Ready for the Opening of 2,000 Luxury Hotel Rooms

7 January 2018 – Expansión

The hotel market in Madrid is enjoying a happy time. After years as the ugly ducking of Europe’s capitals, with barely any major luxury brands operating in the city, 2,000 luxury rooms are scheduled to open in the city centre over the next two years. “Spain had a very moderate number of five-star hotels in comparison with other global capital cities. Nevertheless, the Town Hall of Madrid implemented a strategic plan for tourism, which boosted the image of the city as a global destination and that attracted international companies, which are taking the city to their own tourist clients”, says Javier García-Mateo, Partner in Financial Advisory at Deloitte.

“The existing luxury hotel stock comprises around 5,000 rooms and over the next few years, another 2,000 rooms will be added, of which 1,000 will be new and the rest will be in renovated properties”, adds Félix Villaverde, Manager at Deloitte Financial Advisory.

The first hotel already opened over Christmas: the US hotel chain Hyatt Hotels has returned to Madrid, specifically, to the heart of the city with the opening of Centric Gran Vía Madrid, a five-star establishment with 159 rooms – including 16 suites (…). With an investment of €30 million, Hyatt has returned to Madrid, after leaving the management of another five-star hotel in the capital in 2009: the Villamagna.

During the first quarter of 2018, another five-star establishment is expected to open. In this case, it will be the chain VP in Plaza de España. It will contain 214 rooms, spread over 17 storeys, following an investment of €90 million (…).

Projects on the lookout for a brand

Some of the other new projects planned for this year in the luxury hotel market in Madrid have not yet been defined. They involve plans for the former Hotel Velázquez and the property owned by the fund KKH in Plaza de las Descalzas.

Last May, the Salazar family sold the Gran Hotel Velázquez for around €60 million. Now, the new owner, the real estate group Didra, is looking for a hotel partner to operate the renovated property. In the case of KKH’s property in Madrid, the negotiations are more advanced. The former headquarters of the Monte de Piedad de Madrid is being renovated to open a five-star hotel and a dozen brands have expressed their interest in operating it. The Park Hyatt, The Peninsula and Saint Regis, from the Starwood group, are the favourites in the running, according to sources in the sector (…).

In addition to these projects that still need to be defined, in 2019, several luxury establishments are due to open, including, the first Four Seasons Hotel in Spain, which will open in the Canalejas complex with more than 200 rooms.

Moreover, a four-star, but nevertheless high-profile, hotel is being created by the Mallorcan chain RIU, which will restore Edificio España, in disuse for a decade, to open a modern urban hotel with 650 rooms.

Meanwhile, Marriott Starwood, the largest hotel chain in the world, has teamed up with the Indian investor Harry Mohiani to open a five-star hotel in the former Hotel Asturias, in the same square as the Four Seasons (Canalejas). That property will have 160 rooms (…).

Prices

The opening of these new luxury hotels will have an impact on room rates, which already saw a significant increase in this niche last year.

“Revenue per room (RevPar) in the five-star segment in Madrid has grown by 6.4% p.a. in recent years, almost four times more than the average in other European centres, due not only to the increase in rates but also the better performance in terms of occupancy rates”, say sources at Deloitte.

“The arrival of new luxury operators in Madrid will drive up the price of five-star hotels in the city. In fact, after carrying out comprehensive renovations, we have already seen examples of hotels that have increased their rates by 50%. The most exclusive hotels will charge €750 per night during certain periods of the year”, they add.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

KKH Capital Buys ‘Art Montfalcó’ Building In Barcelona For €24M

13 November 2017 – Eje Prime

New investment operation in the heart of Barcelona. In the midst of the political uncertainty, the real estate market is remaining active. The group KKH Capital has just acquired the Art Montfalcó building, located in the heart of the historical centre of Barcelona, for almost €24 million, according to market sources. The investment fund Medcap Real Estate and the real estate group Castmor had also submitted bids for the property.

The KKH Group has acquired the property through its parent company. Moreover, the company also operates in the real estate sector through KKH Property, a joint venture formed by KKH Capital, the investment group controlled by the former CEO of Renta Corporación, Josep María Farré, and Perella Weinberg, which participates in the partnership through one of its opportunistic funds.

The building, baptised as Palau Castañer in 1906, has been sold by the Güell family; it is currently leased to the Art Montfalcó souvenir shop. The surface area of the property is 2,000 m2. According to the same sources, the objective of KKH Capital is to renovate the retail premises and negotiate with a new operator (…).

KKH Capital, which specialises above all in residential assets, will add this property to its portfolio. The group, through KKH Property, has been acquiring assets over the last few years, including some as iconic as the Deutsche Bank tower in Barcelona, located at number 111 Paseo de Gràcia, which it bought from three Andorran families (the Reigs, the Ribas and the Cerquedas) for €90 million.

After negotiating with the hotel chain Four Seasons, the group has leased that building (the Deutsche Bank tower) to Seat. In total, it will comprise 2,600 m2 spread over four floors: a basement, ground floor and two upper floors. The store will not be a typical concession, but rather is looking to become a point of reference for the city. It will include a gastronomic space and a coworking area, whose features have not yet been defined.

The establishment will open at the end of 2018. KKR will undertake a major renovation of the building, for which it will engage the architecture firm OAB, led by Carlos Ferrater, author of the Olympic Village in Barcelona and the Catalunyan Palau de Congressos, amongst others.

One of its other most recent acquisitions is the Monte de Piedad building, located in Madrid. In that case, the group reached an agreement with the Fundación Montemadrid at the end of last year to buy the property for around €80 million. KKH’s plans for that property involve converting the asset into a luxury hotel.

Original story: Eje Prime (by Custodio Pareja)

Translation: Carmel Drake

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

Colau Convinces KKH To Abandon Luxury Hotel Project In BCN

2 October 2015 – Expansión

The real estate fund KKH, which owns the Deutsche Bank building in Barcelona, has agreed not to expand the property and convert it into a luxury hotel, as it had planned, after running into strong opposition from the new mayoress of Barcelona, Ada Colau.

The project has been affected not only by the moratorium imposed by Barcelona en Comú, but also by the fact that its suspension was one of Colau’s election promises.

KKH required permission from the Town Hall to demolish the building and construct a larger one, measuring 5,000 m2 more. In exchange, it has agreed to purchase the ‘Taller Masriera’ for €10 million and cede it to the Town Hall for public use, as well as to acquire the construction rights from Los Lluïsos de Gracia, who were willing to transfer the building rights in exchange for financial compensation.

The fund led by Josep Maria Farré has thrown in the towel and announced that it will renovate the existing building to convert it into luxury housing. In this way, the city bids farewell to a project that would have involved the entry of the hotel chain Four Seasons into Barcelona and the creation of 380 direct jobs.

Yesterday, the deputy mayoress for town planning, ecology and mobility, Janet Sanz, said she was pleased that the developers “had understood the extent of the fatigue that is affecting the city and its residents, regarding the cost and impact that certain operations may have in specific areas”.

Original story: Expansión (by M.A.)

Translation: Carmel Drake

KKH & Perella Pay €91 Mn For Deutsche Bank Building in Barcelona

11/07/2014 – Expansion

In the first large real estate transaction of the KKH Property Investors (set up by ex-CEO of Renta Corporación Josep Maria Farré) and U.S. manager Perella Weinberg, the teamed-up companies bought yesterday the tower of Deutsche Bank situated at 111 Paseo de Gracia street in Barcelona.

According to sources with knowledge of the operation, KKH Property Investors and Perella paid around €91 million for the property to three Andorran families: the Ribas, the Reig and the Cerqueda. They purchased the building in 2002 for about €80 million.

Initially, the one who was interested in the bidding for the tower was fund Emin Capital, the same that acquired the Torre Agbar also in Barcelona, which consulted KKH Property Investors. However, facing the alliance of KKH and Perella, the fund left the auction.

The buyers´target is to convert the office building into a luxury, five-star hotel with commerce added. Currently, the property houses the Cuatrecasas lawyers office that will stay as its tenant until the end of 2016.

KKH Property Investors foresees spending €500 million on the real estate shopping.

 

Original article: Expansión (by S. S.)

Translation: AURA REE

KKH Property Investors JV Born to Invest €500 Mn in Madrid & Barcelona Buildings

4/07/2014 – Expansion

International investment funds continue their poach in the Spanish real estate market. Perella Weinberg, a private equity fund from the United States, has just created a joint venture with Spanish firm KKH in order to do a building shopping for €500 million in Madrid, Barcelona and Lisboa. The vehicle received a name of KKH Property Investors, gathering €200 million in own funds supplemented by a €300 million loan.

The New York – based equity manager will inject the amount through its European RE investment arm Perella Weinberg Real Estate Fund II. The vehicle disposes of €1.3 billion in committed funds and has repeatedly acquired property in the other Old Continent countries. It is supported by institutional investors from all around the world, as well as most active sovereign wealth funds and public and private pension funds.

Perella Weinberg will be the majority stakeholder at KKH Property Investors, whereas KKH will hold a small stake in it but will manage the joint venture.

The new company “will initially give priority to development of hotel and high-end residential projects which are most demanded by the international buyers.”

KKH Capital & Property was founded by ex-CEO of Renta Corporación, Josep Maria Farré, in 2012. It is based in Luxembourg and has got an expert delegation team in Barcelona. He assures “the fear and doubts among the foreign investors have disappeared and now they believe in the turning point in the Spanish market.”

At present, KKH Property Investors has assigned €250 million to several ongoing projects. The first three buildings were purchased with an aim of converting them into hotels. One of the properties is situated in downtown neighbourhood Born in Barcelona, very close to the Santa Caterina market.

According to Farré, Perella Weinberg targets buildings which might gain some value in 5-7 year term.

 

Original article: Expansión (by Marisa Anglés)

Translation: AURA REE