Project Formentera: Santander To Sell €170M Hotel Debt Portfolio

18 May 2015 – El Confidencial

A new portfolio of hotel debt has just come onto the market. At a time when investors’ interest in these transactions is at an all time high, Santander has put loans worth €170 million relating to 17 hotels up for sale.

A new portfolio of hotel debt has just come onto the market. At a time when investors’ interest in these transactions is at an all time high, Santander, the largest Spanish bank, has decided to pique the insatiable interest of international funds in this type of transaction through the launch of an operation known as: Project Formentera.

It involves a portfolio of loans worth €170 million, linked to 17 hotels. The majority are located in the Community of Valencia and the Canary Islands, which encourages operations with investors interested, primarily, in the holiday segment and in the (Canarian) archipelago.

The portfolio that Santander has just launched joins those being promoted by two of its main rivals, BBVA and Bankia, which have also decided to take advantage of the window of opportunity that has opened to try to offload some of their debts, which include loans that the financial entities are very keen to divest.

According to sources in the market, unlike what may happen in the residential market – a business the banks know very well, since historically they have had the best prepared teams to manage such assets when they fail – the hotel business is a very specialised segment, whose incident rate (casuística) is more difficult for financial entities to manage.

This means that their priority, in general terms, is to try and sell debt, rather than foreclose it and take ownership of assets that they are much less familiar with than residential. If we add the insatiable appetite of the large international investors for the hotel sector, fuelled by the perfect combination of low prices and a strong recovery in the tourism sector, now is the perfect time to carry out these kinds of transactions.

A string of transactions

In fact, at the end of last year, Bankia closed the sale of a batch of hotel loans to Starwood and Sankaty for €400 million (Project Amazona) and is now finalising the second part of that transaction, known as Castle, whose finalists are Apollo, Oaktree and Bank of America. BBVA has also just opened the bidding for 14 hotels it inherited from unpaid loans, a process known as Project Otelo; meanwhile Sareb has just engaged N+1 to manage the sale of a portfolio with a nominal value of €500 million, which is linked to the property developer Polaris World, in an operation known as Project Birdie.

And so the list goes on. A few weeks ago, the German bad bank FMS Wertmanagement sold the portfolio known as Gaudí to Oaktree for close to €500 million – a batch of problem loans linked to, amongst others, the iconic luxury hotel Arts de Barcelona, as well as another high-end property in Cascais (Portugal), five shopping centres, including Plaza Éboli and Heron City, several storage buildings, and residential and industrial assets.

Moreover, the large financial entities that signed the €152 million syndicated loan with the Basque property developer Urvasco, which, in turn, owns the hotel chain Silken, have spent the last few months selling their stakes both in this debt, as well as in those linked to certain establishments, including the Puerta de America hotel in Madrid; Bank of America is taking advantage of this window to enter through the ‘front door’ of what is considered to be the last great Spanish hotel chain up for sale.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

BBVA Seeks Buyers For 14 Hotels

13 April 2015 – El Confidencial

The hotels are located all over Spain – in Lloret de Mar, Jaén, Benidorm – but according to sources, some of them have been closed.

This is not a transaction involving debt with hotel collateral, but rather the sale of the assets themselves, of their flesh and bones, of their cement and brick. BBVA has hung a “For Sale” sign over fourteen hotels that have been sitting on its balance sheet since various non-performing loans were foreclosed, according to a number of sources. Aguirre Newman has received the sales mandate, but neither the consulting firm or the bank have wanted to make any declarations in this regard. The transaction has been dubbed Project Othello.

The hotels in question are located all over the Spanish peninsular – in Lloret de Mar, Jaén, Benidorm – but according to various sources, some of them are currently closed, with the consequent saving in terms of management and operating costs – the payment of salaries, for example.

BBVA’s decision to put these assets up for sale comes at a time when investors’ appetite for Spanish assets is growing rapidly, thanks to confidence in the growth of the Spanish economy, the record number of foreign visitors to our country, as well as legal certainty.

There is activity in the real estate market, and specifically, within the hotel segment. In 2014, transactions with a value of €1,080 million were closed, representing an increase of 37% over 2013, and twice the figure recorded in 2012, according to data from the consulting firm Irea. It represented the third highest investment volume in the last twenty years, only behind €1,095 million in 2007 and €1,780 million in 2006, an exceptional period for the sector.

Nevertheless, hotel experts consider that it is unlikely that BBVA will find a single buyer for all of these hotels; instead they think that the most likely option is that the entity will end up selling the assets individually to private investors.

BBVA’s is not the only hotel transaction currently on the market. In addition to the sale of these assets, other entities are also negotiating the sale of various debt portfolios that are secured by hotels as collateral. Such is the case of Bankia’s Project Amazona, worth €400 million, secured by around fifty hotels and Project Gaudí, a portfolio of real estate loans worth €750 million, held by the German “bad bank”, which at the time was used to buy the Hotel Arts in Barcelona. Likewise, the experts do not rule out the creation of hotel Socimis over the next few months, following in the footsteps of Hispania and Barceló.

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake