Dalian Wanda is reported to have acquired the Edificio España building in Madrid as part of its ongoing global expansion.
The deal, for a rumoured USD358.6m, would potentially see the group covert the property into a luxury hotel and shopping centre, sparking hopes of a recovery in Spain’s gateway cities.
The deal was announced to the local Spanish press by the president of the Community of Madrid Ignacio Gonzalez, but has yet to be confirmed by Dalian Wanda, or the seller, Grupo Sandtander.
Gonzalez told journalists that he had met Dalian Wanda chairman Wang Jianlin to “reach some agreements on investment projects”, adding the sale of the building would be very important to the recovery of the Spain Square area of Madrid, where the building is located.
Prior to the acquisition, the company had signed hotel deals in London and New York, to add to its hotels in its domestic market of China. As previously reported in Hotel Analyst, last June saw the company announce plans to build its first hotel outside the Chinese mainland in London, with a total investment of GBP700m.
The hotel is expected to be the first of up to 10 which the developer plans to build around the world over the next decade, as it seeks to capitalise on China’s growing outbound market.
Jianlin said: “Through the international development of Wanda hotels, we are confident that we will be the leader in bringing branded Chinese luxury hotels to the global market, where they have long been absent. The London property market has excellent investment opportunities and we have confidence that Wanda’s strength and expertise will make the Wanda London’s premier hotel, further promoting development in the area.”
After London, the group plans to open hotels in Paris, New York and, it said, at least six other big cities. In contrast to the moves made by international operators to attract Chinese tourists, with home-from-home amenities and Oriental-themed decor, the Wanda hotel will be more art deco in theme, with the company’s take on European opulence.
Within China, Dalian Wanda has a property arm to its hotel interest and a more branding and management-focused business. The Wanda Hotel Investment & Development Company describes itself as the largest enterprise in China in terms of the size of investments into five-star hotels. It currently operates 28 five-star and “super” five-star hotels, and plans to expand to 70 by 2015.
The company covers all aspects of the development process and has partnerships with the majority of hotel management groups, including: InterContinental Hotels Group, Starwood Hotels & Resorts, Hyatt Corporation, Accor and Hilton Worldwide.
Wanda Hotels & Resorts, which was founded in 2012, includes the company’s own brands, which will be used in London. It owns and manages hotels under Wanda Realm, Wanda Vista and Wanda Reign, all luxury brands.
In Madrid, some reports suggest that Dalian Wanda could yet face competition for the site from investors in Mexico and Brazil. If so, while this is bad news for the Chinese company, it is still good for Madrid.
According to PwC’s European Hotels Cities Forecast for 2014 and 2015, Spain is forecast to be an investment hot spot this year, although the report added: “While debt financing is becoming easier, it’s often only for acquisitions and refinancing rather than new development”.
Recovery in the country is expected to remain slow, with PwC forecasting GDP growth of 0.6% this year and 0.9% next, against 2.5% and 2.4% respectively for the UK. There is hope for the tourism sector – Spain welcomed a record 60.6 million international tourists last year, 5.6% more than in 2012.
While Barcelona has retained its position as one of the world’s leading tourism centres during the downturn, Madrid has not been so fortunate, reliant as it is on national and business tourism, hosting the head offices of key Spanish companies, such as Telefonica, Iberia, Banco Santander and Repsol.
In 2013 occupancy and ADR in Madrid decreased by 4.1% and 3.7% respectively. Revpar fell 7.6% from EUR54.8 in 2012 to EUR50.6 in 2013. For this year, PwC has forecast a 2.8% drop in revpar and a 3.6% fall in ADR, with occupancy up 0.8%. The situation is set to improve marginally in 2015, with revpar falling by 1.6%, ADR down 2.8% and occupancy up 1.2%.
Despite the short-term malaise, the global operators have held their faith with the city. New hotel openings have included Ibis, IHG’s Indigo and Holiday Inn brands, Palladium Hotel Group and three new ‘Innside’ hotels by Melia. The first Four Seasons hotel in Spain is set to open in Madrid in 2016 in the city centre, where it is hoped it will provide a boost to the city’s tourism assets.
Madrid has also been hit by fewer air passengers travelling to Madrid – Barajas Airport. In an attempt to reverse this trend, Aeropuertos Españoles y Navegación Aérea has announced that it will decrease airport fees in the near future.
HA Perspective [by Katherine Doggrell]: What does the man who has everything buy himself? A private yacht, usually. As China’s richest man, according to Forbes (a USD15.2bn fortune and counting) Jianlin already has this, with last year’s USD500m deal to buy Sunseeker.
The next stop is usually a football club – it’s good for global profile and gives you something to do on a Saturday afternoon. Since 2011, the company has been a sponsor of the Chinese Super League and the company invests in a programme to bring young Chinese players to train and play at La Liga clubs.
This investment fortuitously saw Jianlin in Spain for four days last month, where he took a tour of the Real Madrid training ground, one of the clubs involved in the company’s scheme, and confirmed to the city’s mayor that he was actively looking for investment opportunities in the city.
If you’re going to invest in football, invest in the best (it behoves me at this point to ignore his rumoured interest in Southampton FC). At the start of this year Real Madrid was named the world’s richest football team for the ninth consecutive year, according to a study published by Deloitte. And those visiting dignitaries to Real’s games have to stay somewhere.
For Dalian Wanda, investing in the Edificio España, if it goes ahead, is less of a punt on a struggling city than it appears. The property itself was built as a hotel (and was in the process of being redeveloped back into one from an office block when the downturn struck) and was the tallest building in Spain when it was finished in 1953. Regarded as one of the better examples of 20th Century architecture in the country, it also fits in with the company’s mixed-use strategy and what better for those Wags (and wealthy outbound Chinese) than a shopping centre and luxury hotel combined?
When Four Seasons announced its deal to open in the city, the company said: “Madrid has long been on our wish list”. Well it would. Like the anticipated Edificio España deal, the project is in an architecturally significant building and will feature a shopping centre. It will also include apartments and business facilities, as the group hopes to attract not only international luxury traveller, but both local businessmen and those attending corporate events.
In its previous overseas ventures, Dalian Wanda has made safe bets. In Spain, with stability and creeping growth, the company may be sticking to its strategy after all.