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But, according to several market sources close to the negotiations, Fairmont has now also withdrawn from the bidding, leaving the way open for Mandarin.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

Fairmont Makes For Madrid’s Ritz As Marriott Withdraws From the Bidding

23/09/2014 – Expansion

A new bidder joined the auction of Hotel Ritz in Madrid. As Marriott backtracked on its €130 million bid for the one of the most beautiful hotel jewels in Spain, Fairmont barged in to compete for it. The property belongs to Omega Capital of Alicia Koplowitz and to Orient-Express, holding 50% of it each.

In 2003, the owners bought the establishment for €125 million from Le Meridien.

In May, the partners hired JLL (former Jones Lang LaSalle) to look for a new purchaser in the middle of fever caused by the arrival of Four Seasons to the capital. The high-end chain from Canada is going to open a hotel inside the Canalejas complex in 2017.

The move convinced many international chains to invest in Madrid. For instance, such brands as Mandarin Oriental, Hyatt, Marriott, Hilton or InterContinental are already eyeing the market. Therefore, the bidding for the Ritz establishment was expected to be more fierce.

Marriott outbid all the competitors with its €130 million offer ,however in the last moment the board of directors of the famous chain opted out. Purchase of the 137-room and 30-suite hotel also means a €40- to 50-million investment in its refurbishment.

Fairmont was officially founded in 1907 but its roots reach the year 1885. In 1999, the chain fell in hands of a hotel branch of Canadian Pacific Railway but its brand name was saved. In 2006, Fairmont joined Raffles and Swissôtel in a holding, called FRHI, managing 110 hotels in Europe and U.S.A. Four years later, Qatari Diar paid €847 million for a 40% stake at the holding and offered buying the share of Colony Capital.

The Qatari fund acquired Hotel Vela for €200 million and, at the beginning of this year, Hotel Renaissance for €78.5 million from Marriott, both properties found in Barcelona.

Hotel Ritz itself is a collateral for the loan that its owners borrowed from Eurohypo and which was included in the mega-NPL sale called the Octopus Project, finally sold to U.S. fund Lone Star.


Original article: Expansión (by Y. Blanco & J. Zuloaga)

Translation: AURA REE

Alicia Koplowitz & Orient-Express Seek Buyer For Hotel Ritz in Madrid

6/05/2014 – Expansion

The Hotel Ritz in Madrid returns to the market after a decade. Omega Capital, an investment firm chaired by Alicia Koplowitz, together with Orient-Express that is managing the establishment hired JLL (former Jones Lang LaSalle) to say goodbye to the property they acquired for €125 million from Le Méridien in 2003.

There are several solutions in talks: the hotel could be sold to a third party but managed by Orient-Express, or the luxury chain could waive operating the Ritz completely. The latter scenario would multiply the number of aspirants wanting to acquire the property. There is also a possibility that a fund would finance refurbishment of the building through more expensive mezzanine debt.

Noteworthy candidates that have already presented their proposal are, among others: Marriott, Hyatt, Hilton, InterContinental or Mandarin Oriental, all looking for an excellent location in Madrid´s center.

Moreover, sources with knowledge of the market suggest that perhaps Orient-Express could buy Omega´s stake in the hotel or vice versa.

The Four Seasons´s plans to open a hotel in the Canalejas complex in the capital in 2017 attracted attention of other world-wide known hotel giants.

When it comes to the hotel itself, at the end of 2012 its books showed a 6% cut in revenues (down to €23 million) and loss reduction by 76% to €3.3 million. That time the property had a mortgage to assure payment of €65 million in loans from Hypothekenbank. In 2013, its owners contributed with €6.38 million that jointly rise the shareholders´credit to €38 million.

The property yet does not dispose of all the town planning permissions from the City Council of Madrid. Investment in its renovation would consume between €40 and €50 million. After the remodelation, it will offer less rooms but more suites (currently it has got 137 of the first and 30 of the second type).



Original article: Expansión (by Yovanna Blanco)

Translation: AURA REE