There is still a significant gap between what buyers want to pay and what sellers want to receive
The Atalaya fund, created by Andbank to invest in the Spanish hotel sector, has 60 purchase operations on the radar. Of these, between 15 and 20 have a purchase letter, because they fit in the areas where the fund is looking for alternatives. And in addition, it is in “deep conversations” – according to Eduard Martín Quero, head of the fund – with the ownership of a dozen establishments to which the investment instrument is about to make the first offers.
“So it would not be ruled out that in the first months of 2021 we start buying hotels,” he says. Atalaya is just one of the institutional investors operating in the Spanish sun and beach sector in search of investment opportunities.
The fund’s approach is simple: find hotels on the beachfront that may be among the preferences of English, German or Norwegian tourists for when COVID allows them to return and raise the current valuation of those establishments. ” Its value has fallen between 20 and 25% due to the health crisis,” says Martín. He hopes to invest around 150 million euros in the purchase, and then sell them within five to six years, with prices equal to those of 2019. “We wanted to be conservative in our business plan,” he points out.
When that strategy has been self-fulfilling, investors in the fund will have returned above 13%. Before the pandemic, achieving 5% or 6% was more than an acceptable return. Oriol Serra is a founding partner of Yurbban Hotels, a chain with two four-star establishments in Barcelona, as well as apartments – formerly tourist ones – and he tries to take advantage of the current moment to grow.
They are in buyer mode in the Barcelona hotel market. “There are many hotels for sale, but the prices at which they are willing to sell do not match the purchase prices,” he explains. There is still a significant gap between what buyers want to pay and what sellers want to receive. Now the offer is high. There are hotels, but prices are still high, the risk that the buyer assumes with the acquisition has not yet been adjusted, ”he says.
Serra is in buyer mode. You know that there are a good number of hotels for sale in Barcelona and other cities. “We are bound by a confidentiality pact not to explain what the operations are, but there are,” he says. However, other sources in the sector may be somewhat more precise. “The Juan Carlos I is on the market, closed and in Hotusa has also put some assets up for sale through a specialized agency “, says Albert Grau, partner and co-director of Cushman & Wakefield Hospitality .” We have some projects: a couple of four-star hotels. We also have a profile of three stars, cheaper, “he explains.
Offer in Barcelona
They are not the only ones. El Mandarín, Florida, and Miramar are also on the market, according to a banking source. “The two seconds, in fact, have not left the market”, he adds, “There are also between three and four small hotels, with between 30 and 40 rooms for sale in Barcelona,” they add. You don’t have to go very far, even in real estate portals it is possible to find establishments that are looking for a buyer. Nobody doubts at this point that the hotel sector in Spain is for sale. The supply is not lacking and, of course, neither is the demand. In recent months, five powerful investment funds (Azora, Millenium Hotels, RLH Properties, and Grupo Platinium Estates) have decided to allocate around 2,500 million euros for the acquisition of hotel assets in different holiday destinations in the country, among which San Sebastián, stand out. Córdoba and Málaga, reports Ramón Ferrando.
Azora has raised nearly 700 million euros to invest in Mediterranean hotels. The firm bought five hotel establishments in Benidorm from the Med Playa group a year ago and now plans to multiply its investment. The company seeks to have a direct investment capacity of more than 1,500 million euros. The British manager Schroders is also working on the purchase of hotel assets in Spain with a fund of 500 million euros.
But supply and demand are still far behind in valuations, particularly in urban hotels. “Hoteliers have not assumed that the value of their assets has fallen more than they think,” explains Jorge Núñez, head of the hotel sector at CBRE. But there is another element that makes it difficult for operations to be carried out: banks are not willing to finance. “We are not able to secure a three-year business plan in the sector,” explains a banker. And only the efficacy of the vaccine can modify the analysis.