Hispania has accepted a revised offer from Blackstone, making the private equity group Spain’s largest hotel owner.
Blackstone recently lost out in the bidding for the 29.5% stake in NH Hotels Group being sold by HNA, to Minor.
The offer, made through the Alzette Investment vehicle, was increased from EUR17.45 for each Hispania share to EUR18.25 per share, which Hispania described as “adequate”, valuing the Reit at over EUR2bn. Blackstone already holds a 16.6%, acquired from Soros Fund Management, and plans to delist the Reit, which was launched in 2014.
Hispania had described the initial bid as hostile and said that it would look for alternative bids.
Hispania’s current portfolio includes more than 180,000sqm in offices, 650 dwellings and 46 hotels. The real estate asset portfolio is currently valued at EUR2.81bn, an increase of 5.7% over the valuation carried out at the end of last year.
Blackstone Group has been building its portfolio in the country over the past year. In November it acquired 14 assets from Hotel Investment Partners, giving it a platform of primarily coastal hotels with over 3,700 rooms in Spain.
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 was thought to have beaten Brookfield to the deal.
The private equity group also counts itself as one of Spain’s largest real estate owners, with holdings across the asset classes. One of the most significant deals was the acquisition of a 51% stake in Banco Popular’s real estate business last year, including assets with an aggregate gross value of some EUR30bn (EUR18bn of assets and around EUR12bn of non-performing loans) in addition to 100% of the Aliseda capital, the company’s real estate company.
Global director of real estate at Blackstone, John Gray, said: “This important investment reflects our confidence in the strength of economic recovery in Spain. We are delighted to be able to partner with Santander to maximise the value of the portfolio.”
The private equity group made its first move in the country in 2013, in the residential market, with the purchase of 1,800 rental units in Madrid from the local authority for EUR125m. The following year it bought around 40,000 units from Catalunya Banc for EUR3.6bn.
Last year saw Hispania become the leading hotel owner in Spain after paying EUR16m for the Hotel Selomar, taking it to 13,100 keys across 46 different properties.
The group consolidated its position Grupo Barceló sold its 24% stake in Bay Hotels & Leisure to Hispania in a deal worth a total of EUR172m, making Hispania the sole owner of the Reit which the two created in 2015. Grupo Barceló remained Hispania’s strategic partner, operating close to 20 of its 45 hotels.
“Hispania has demonstrated its execution and value creation capacity, committing all of its investment capacity and creating the largest vacation hotel portfolio in Spain,” said Concha Osácar, board member of Hispania, at the time of the deal.
Commenting at its annual results, president Rafael Miranda said that annualised hotel yield over total investment cost at the company had reached a 10.5% in 2017, making it the most profitable asset class for the group and one of the highest compared with other real estate asset classes.
Miranda added: “However, even if the company has completed its investment period, we still have important levers to create value and improve our results. One of the most important ones will be given by the additional profitability coming from those projects pending full refurbishments.”
The company plans to spend EUR280m over the next two years, which it said should mean a yield on investment of 11.5%.
Miranda concluded: “The outlook in the Spanish resort segment is very promising and is reinforced by the good trends of the hotels in the portfolio. For example, in the portfolio managed by the Barceló Group, which has started the first months of 2018 with an increase of 14% in revenues of rooms on books for January, February and March compared to the previous year, and has closed the month of January with an increase in the GOP of the hotels of 4.6% compared to January 2017.”
HA Perspective [by Katherine Doggrell]: So what now for Spain’s largest hotel owner? Xavier Batlle, associate director, Christie & Co, Spain, told us: “It seems clear that HIPartners will be the asset management platform that Blackstone will use, not Azora, same platform that Blackstone will use for other hotel real estate assets. The challenge will be to manage a platform of 60 hotels (46 of Hispania plus 16 of HIP). To do so, HIP will need to increase significantly its size.
“It will also need to create new upside on the assets of Hispania, as most of them have been well managed by Hispania with competitive agreements set with hotel operators/partners – such as Barceló.
“On that point it seems that part of the strategy will be to move assets from the current lease agreements structures they have to management agreements, more open agreements that will bring new options for upside – theoretically.”
And what now for Spain? Batlle said: “I believe it is one of the most significant hotel deals we had on the table so far, not only because of the volume, also because I believe it translates into a symbol of an era where the Spanish hotel industry has emerged as one of the most relevant on the world.”