Sonae Sierra, the global property company headquartered in Lisbon, Portugal, is in the midst of a drive adding new investment types and risk profiles to its business.
The company best known for its pan Europe mixed-use retail property portfolio, is diversifying into the hospitality sector with a value-add return strategy – both aspects being new to the company.
To achieve diversification into the hospitality sector, Sierra has signed an agreement with PGIM Real Estate to launch an Iberian hospitality platform that it hopes can get €200 mln gross asset value of investments. Iberian Hospitality Solutions (IHSP) led by Gonçalo Batalha is party to the deal as an experienced hospitality operational management company.
PGIM is investing on behalf of its European value-add strategy.
The agreement is structured as a JV to target sizeable hotels in consolidated leisure destinations and deploy strategies to maximise value creation.
The first acquisition is a top-tier upper-upscale hotel in central Porto. Situated within walking distance of the city’s main attractions, it is scheduled to open in the second half of 2024 aiming at becoming a reference in Porto´s tourist market.
Luis Mota Duarte, CFO and executive director, investment management at Sierra, said the company, PGIM Real Estate and Gonçalo Batalha’s team saw an opportunity to ‘execute an evident value creation strategy in the European hospitality segment’.
Duarte joined Sonae Sierra in 2018 as CFO but also holds responsibility for the investment management area. He has also headed up the m&a divison at Sonae Sierra's holding company, SGPS, and previously spent 14 years in London, notably as director at private equity firm, Bridgepoint Capital.
He explained: ‘This is our first, dedicated hospitality vehicle, which is a testament to our ambitions to cover a full range of asset classes and sectors with dedicated competences, including our recent acquisition in Porto.’
Batalha of IHSP said: ‘In the current market environment, marked by higher interest rates and sizeable investment requirements to reboot quality standards in hospitality, we see this new endeavour as the opportunity to unlock superior risk-adjusted returns. We believe in a long-term positive trend for the tourism sector, as the spending share for experiences continues to thrive, strongly supported by a wide range of attractive structural factors.’
Nabil Mabed, head of France, Spain and Portugal, at PGIM Real Estate, added the hotel leisure market had long been a fundamental sector for the Iberian economy. ‘Portugal is a top-Southern European hospitality market, attracting a growing international demand, with significant upside to be captured if the quality of supply is upgraded to meet the international demand requirements. In the current environment, investors look for value accretive, inflation hedged and cash-flowing investments to deliver attractive returns. Our strategy aims to consolidate local players and improve the quality of the offering to guests. Our partnership with Sonae Sierra and IHSP and the acquisition of the first hotel in Porto, endorses our positive outlook for the area and the strategy deployed.’
Sonna Sierra used to be 50% owned by the UK's Grosvenor Group but Soane SGPS now owns all of it.
