'Foreign national fund wants to buy Spanish hotel'

Investing in real estate in 2023 is not a good decision. According to various national market consultancies, volumes are down 50% from the same period in 2022.

There is one asset type that is successfully sidestepping this period of low activity due to rising interest rates - hotels. Between January and September, €2.2 billion worth of deals were closed in the hotel segment, down just 7% year-on-year, according to CBRE.

Investments were led by international investment funds at 75%, namely 34% co-sovereign and 27% institutional. To date, including also October (according to preliminary data), already exceeded the figures for''2022, which ended at 3.279 billion, according to data from advisory firm Colliers. 2023 will be at least the third best year on record, only after 2018 and 2017, which saw Blackstone's €2 billion acquisition of Hispania, among other deals.

Three significant deals had already been recorded before last week, in two of them Abu Dhabi sovereign fund ADIA played a key role: they paid 600 million euros for 17 hotels owned by the founders of the Tryp chain, and around 250 million for a 51% stake in the Proyecto Calviá Beach project, which includes seven hotels in the city of Magaluf in Mallorca, whose shares were previously owned by Avenue Capital fund. The third deal, in the luxury hotel segment, was made by Saudi''by the Olayan family, which acquired the Mandarin Oriental in Barcelona for more than 200 million euros. Three deals worth more than €1 billion in which Arab capital played a key role.

An even more significant investment was made last week, this time also by Singapore's sovereign fund GIC. This fund, one of the most active in Spain, bought a 35% stake in Hotel Investment Partners (HIP), the largest hotel owner in the country with 59 assets, mainly in the Canary Islands and Balearic Islands, from Blaxton. According to a Financial Times report, the deal amounted to about 1.4 billion euros, increasing sovereign wealth funds' investment in the country's hotel sector to over 2 billion, which, according to Laura Hernando, general manager of the hotel division at the consultancy''Colliers' firm, is a "natural trend" because "Spain is a market that has already reached maturity, internationally recognized as safe and reliable, with good infrastructure, legal security and a unique location.

Why are sovereign wealth funds buying hotels in Spain? Victor Casarrubios, real estate partner at international law firm Fieldfisher, explains why sovereign wealth funds have been the main players in investments this year. "Spain has always been a country that has seen investment from sovereign wealth funds. 2022 was a record year and this year we are continuing on that path. There are several reasons: they are pursuing diversification strategies in real estate and technology, in addition, in an environment of uncertainty and''rising financing costs they are investors who act lightly and have an advantage'.

In the case of Arab funds, Jorge Ruiz, director of hotels in Spain at consulting firm CBRE, said they are buying hotels "because they are diversifying their portfolios due to the depletion of fossil fuel reserves, which is prompting them to invest in other types of assets," including real estate and hospitality, which offer attractive yields. In the case of Olayan, they expanded their luxury hotel portfolio with the acquisition of the Mandarin Oriental in Barcelona, similar to the Ritz hotel in Madrid, which they already own. Regarding GIC's investment, Victor Casarrubios notes: "Their investment makes sense within the framework of their''real estate strategy in Spain. They are present in all kinds of assets, including offices, residential real estate, logistics, and luxury hotels, and it makes sense to diversify their assets in the vacation segment." The Colliers executive also emphasizes that Blackstone, HIP's main partner, is usually a key alliance for sovereign wealth fund investments in this Asian country.

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