Starwood Capital and Blackstone Group are thought to be the frontrunners in a bid for the 29.5% stake in NH Hotels Group being sold by HNA.
The rumours came as Minor Hotels Group issued a statement denying that it had plans to join the fray with a bid on the shares.
While Minor has only one property in Europe, in Portugal, both Starwood Capital and Blackstone Group have extensive experience in Spain. Minor released a statement saying that it was not in discussions to buy a stake in NH Hotels, but said that it had been approached by several brokers.
In November last year Blackstone acquired 14 assets from Hotel Investment Partners, giving it a platform of primarily coastal hotels with over 3,700 rooms in Spain. The private equity group was expected to combine the resorts with part of the Banco Popular portfolio it acquired earlier in the year.
The HI Partners portfolio was sold by Banco Sabadell for EUR631m, after reports had suggested that the bank would seek a public listing for the group. Blackstone is thought to have beaten Brookfield to the deal.
Anthony Myers, head of real estate Europe, Blackstone, said: “We are delighted to make another substantial investment in Spain and to have the opportunity to partner with the HI Partners management team, working with them to continue to execute their strategy of growing HI Partners into Spain’s premier hospitality business.”
Starwood Capital has also worked with HI Partners, joining forces with group in 2016 to invest EUR500m in the Spanish hotel sector over following three years. The pair created a limited company in which the US firm had a 70% stake.
Its investment strategy was geared to establishments with over 200 rooms in premier tourist destinations such as the Balearic and Canary Islands, Costa del Sol, Costa Dorada and Costa Brava. It will also be on the lookout for urban hotels in Barcelona and Madrid which may match its interests.
Keith Evans, VP, Starwood Capital Group, said: “We view the Spanish hotel market as extremely attractive, due to its positive fundamentals, strong demand from both national and international guests and the steady recovery of the broader economy. We look forward to building a high-quality portfolio of hotels representing the top resort and urban destinations in Spain.”
The joint venture came one year after the group created another joint venture, on this occasion with Meliá Hotels International, for the acquisition of hotels in Spain. The fund controls an 80% stake in the joint venture, whilst Meliá owned the remaining 20%.
In July last year the joint venture sold a portfolio of four hotels to London & Regional for a reported EUR230m. The group consisted of four Sol by Meliá branded assets in Ibiza, Mallorca, Lanzarote and Costa del Sol, one of the largest portfolio transactions in the history of the Spanish hotel market.
Evans said: “The swift transformation of both the physical product, as well as the operational overhaul of the portfolio, generated a substantial increase in both Ebitda and capital value. We look forward to continuing to grow the remaining two hotels in the portfolio, while identifying new investments for the joint venture going forward.”
The pair were joined in Spain by Bain Capital Credit, which has built a significant position in Spain, where it has acquired non-performing loans, leases and real estate valued at more than EUR3.5bn since 2014, including in the hotel sector.
“We believe Spain is one of the most attractive NPL and real estate markets in Europe and Habitat’s sizeable land plots in major cities are a great opportunity to expand our footprint in the residential development sector,” said Fabio Longo, a managing director and head of Bain Capital Credit’s European non-performing loan & real estate business. “We see the potential for continued investment in Spain, particularly in the real estate and non-performing loan markets.”
The country’s strong performance continues to attract buyers. In 2017, the number of international tourists visiting Spain improved for a fifth straight year. The country attracted 82 million tourists, making Spain the world’s second-most visited country after France and pushing the US into third place. Tourist spending has also hit a new record in 2017, rising 12.4% in the year from 2016. Revpar for the year rose by 8.8% EUR85.29, according to STR Global.
HA Perspective [by Katherine Doggrell]: The IHIF in Berlin saw Raúl González, CEO, Barceló Group – which proposed a merger of the company with NH last year, comment to delegates that he thought the plan made “a lot of sense for both parties”. He added: “We think it can be a good platform, for trading now and deals in the future”. It was roundly rejected by NH and given the names now being linked to the stake, one can quite see that cash may turn out to be king.
For Minor, which made a move into the UK last year by picking up a stake in Corbin and King, a chunk of NH would have given it an instant Europe footprint and proven to the rest of us what breathless brokers keep informing us: money is pouring out of Thailand.
For the private equity groups, which have been mostly making merry by picking up distressed assets and loans, a piece of NH, a mature business, is a break in the old routine. Is there much to be done? Looking ahead, Inmaculada Ranera, managing director, Spain & Portugal, Christie & Co, told us: “Once a more peaceful situation is reached amongst the shareholders at NH, including the buyer of the HNA shares, the upside is likely to require a rethinking of the existing brands in order to define which are the right ones to growth both in Spain and internationally, after which capex will be needed to refurbish/reconvert some of the existing hotels.
“NH brands are well known specially in Spain and Netherlands, and not so much in other countries, so increasing the visibility to be more competitive with other international brands is a must.”
The past year has seen so many possible outcomes for NH – at one point we had merged it with Rezidor – that getting back to business seems mundane. Shareholders are likely to welcome such mundanity.