IREA: Trophy asset deals expected in the Spanish hotel sector

The Spanish hotel sector is forecast to see an increase in trophy asset deals in 2008, according to the Spanish property services and research firm Irea. In its latest Hotel & Resort research report, Irea pointed out that disposals would be a result of the need for Spanish property companies to offload assets in the wake of a more challenging situation in the credit market. Habitat Inmobiliaria, which from last year's takeover of Ferrovial's real estate business inherited a debt pile of EUR 1.7 bn, was forced to sell the hotel Bauza in Madrid for about EUR 60mln to bank La Caixa. In January, real estate developer Evemarina announced the sale of Park Hyatt Casares Golf & Spa Resort in the Dona Julia resort to a Middle Eastern investment fund for EUR 70mln.

The Spanish hotel sector is also expected to see an increase of M&A activity, an example of which is Hoteles Hesperia's plan to launch a takeover bid for NH Hotels in the next six months, and the intention by Morgan Stanley to increase its stake in NH Hotels to 10%. Last year, the hotel sector also experienced high levels of corporate activity, with Mercapital and La Caixa selling their stake in the Occidental Hotels chain to investors Pontegadea and BBVA's Valanza for around EUR 706mln and Vincci Hotels selling its 6.5% stake in the Sol Melia chain for EUR 183 mln.

In 2007, the Spanish hotel investment market registered a total of 42 transactions. During this period 58 hotels were sold for a total EUR 1.1bn, down from EUR 1.8bn in 2006. The drop in investment activity is, according to Irea, a result of the absence of trophy asset deals in 2007. Even so, this was the second most active year for the hotel investment market since 1996, Irea said.