Starwood buys Spanish hotel portfolio for €176m

US-based private equity firm Starwood Capital Group has launched a joint venture with operator Melia Hotels International to acquire a portfolio of seven hotels in Spain for €176 mln.

In a statement, Greenwich, Connecticut-based Starwood said it is taking an 80% stake in the partnership, while Meliá Hotels International will own the remaining 20%.

The JV is initially investing in a portfolio of seven beachfront hotels representing 2,933 rooms with the aim to acquire further assets over the next months.

Operator Meliá Hotels International is selling the properties to the JV and will continue to be manage them upon completion of the transaction.

The initial package includes the Sol Príncipe hotel in Malaga, the Sol Lanzarote and Meliá Gorriones
(Fuerteventura) hotels in the Canary Islands, the Sol Ibiza and Sol Pinet Playa hotels in Ibiza, and the Sol Mirlos and Sol Tordos (Palmanova, Mallorca). The hotels will all be fully refurbished, after which the Sol Príncipe, Sol Lanzarote, Sol Mirlos and Sol Tordos will continue to operate under the new Sol Hotels brand, with the Sol Mirlos and Sol Tordos being renamed as the Sol Palmanova. Sol Ibiza will become Sol Beach House Ibiza and Sol Pinet Playa will be renamed So l House Pinet Ibiza.

'With their irreplaceable locations, strong cash flow-producing businesses and consistent operating track records, these properties present an attractive portfolio with significant potential still to be realized. We look forward to investing in these properties and leveraging Starwood Capital Group’s hospitality expertise to help drive growth in the future,' commented Keith Evans, Vice President, European Hotels at Starwood Capital Group.

'The JV agreement reflects the extraordinary performance of the main Spanish tourist destinations,' commented Jorge Ruiz, head of CBRE Hotels Spain, which advised the vendor.

The joint venture represents Starwood Capital Group’s second transaction in Spain over the last months.
In late October, the firm completed the acquisition of a €800 mln portfolio of loans from state-controlled lender BFA-Bankia Group.

Starwood Capital joined forces with Sankaty Advisors, an independently managed credit affiliate of Bain Capital, to acquire a portfolio of secured and unsecured loans for a 50% discount to face value. A portion of the loans is securitised against some 30 hotels including the five-star Gran Hotel Atlantis Bahía Real in Fuerteventura and 60 commercial properties.

SPANISH HOTEL SECTOR
The announcement comes just days after the launch of Spain's first hotel real estate investment trust. Listed firm Hispania said last week that it has signed an agreement with hotel and resort operator Grupo Barceló on creating a REIT focused on the holiday resort segment.

Under the agreement, Hispania will acquire a portfolio of 11 four-star hotels with a combined 3,946 rooms and one shopping centre in an initial stage. At a later stage, the Spanish REIT will have the option to acquire five additional hotels offering 2,151 rooms and a second shopping centre.

Once the transaction is finalised, Hispania will have invested €339 mln in the company in exchange for an 80.5% stake. Grupo Barceló will maintain a 19.5% interest with the option to boost this to 49% through future capital increases.

Barceló will remain the operator of the hotels through lease contracts with an initial term of 15 years.

The transactions value the 16 hotels and two shopping centres at about €421 mln, with the portfolio estimated to generate rental income of €45 mln a year. Upon closing of the acquisitions, the new hotel REIT will have an initial equity of €187 mln and a €234 mln syndicated loan.

The Barceló assets included in the agreement comprise most of its resort destinations in Spain, including hotels in the Canary Islands, Andalusia and the Balearic Islands.

Hispania and Barceló have agreed to jointly invest an additional €35 mln in the short term in order to reposition and update some of the properties.