Play for property firm Hispania comes as Spain is expected to see big spending boost by foreign visitors during the next decade
Blackstone Group LP is seeking to become the largest hotel owner in Spain and double down on its multibillion-dollar bet on the country’s robust economic recovery and booming tourism industry.
The world’s largest real-estate investor made its first major bet on Spain’s hotel sector in October when it acquired Hotel Investment Partners from Spanish lender Banco de Sabadell SA for €630 million. HI Partners owned 14 hotels with more than 3,700 rooms.
In April, Blackstone bought a 16.56% stake in Spanish property firm Hispania from two funds run by billionaire investor George Soros, and pledged to make a full takeover bid if more than 50% of shareholders accept the deal.
Blackstone still has work to do before it can claim the Hispania prize. Spanish regulators need to approve the deal before the New york-based firm can officially launch its bid. There is also a possibility that other investors would then swoop in with a counteroffer.
Hispania, Spain’s largest hotel company with 13,100 rooms, says it is looking for alternatives to the unsolicited takeover offer. Blackstone offered €17.45 per share, valuing Hispania at around €2 billion.
Still, Blackstone’s move into Spanish hospitality comes with the bull market in commercial real estate in its ninth year and outsize returns getting trickier for private-equity firms to deliver. Prices have hit plateaus in most U.S. and European markets and rising interest rates have lured investors out of property into the bond market.
Blackstone’s bet indicates executives think they can parlay their background in hotels into greater profitability for Hispania. Blackstone has been a majority owner, for instance, of Hilton Worldwide Holdings Inc.
The Spanish hotel market also is attractive to investors partly thanks to Spain’s reputation as a relatively safe vacation spot compared with other Mediterranean countries such as Egypt, Tunisia and Turkey. A country of 47 million inhabitants, Spain hosted 82 million tourists in 2017, a nearly 9% increase from the previous year, according to the country’s statistics agency.
Spain was ranked No. 3 globally behind the U.S. and China in 2017 in terms of the amount spent in the domestic economy by foreign visitors, a measurement of a country’s popularity as a tourism destination, according to the World Travel and Tourism Council. The organization expects Spain to post the third-greatest growth in the amount of spending by foreign visitors in the domestic economy during the next decade, behind the U.S. and Thailand.
If Blackstone’s offer is successful, the firm would become the largest hotel owner in Spain, ahead of Meliá Hotels International SA, with 11,000 rooms. Blackstone’s ultimate goal for its potential Spanish hotel portfolio would most likely be an initial public offering.
Still, Spanish hotel rates could suffer if tensions cool in other countries and competitors become more popular. Some investors and analysts have interpreted Mr. Soros’ exit from Hispania as a sign that the investment cycle for hotels in Spain is nearing its peak.
Mr. Soros was one of the original investors in Hispania, a Spanish real-estate investment trust created in 2014 to capitalize on the then-nascent Spanish economic recovery.
Shares of Hispania, whose full name is Hispania Activos Inmobiliarios SOCIMI SA, were first sold to the public in 2014 at €10 a piece, compared to around €17 at the end of March before Blackstone announced its plans.
A spokesman for Mr. Soros’s fund declined to comment.
Blackstone has an estimated €18 billion ($21.3 billion) invested in Spain, more than any other European country. Many of its deals have paid off in recent years as Spain’s economy grew faster than other major European economies.
Blackstone was an early investor in Spain as the world recovered from the 2008 financial crisis. In July 2013, the New York firm bought nearly 2,000 government-subsidized rental apartments from the city of Madrid for €125.5 million.
A year later, it paid €3.6 billion to buy €6.4 billion in home loans from Catalunya Banc SA, a bailed-out regional lender.
In August 2017, Blackstone bought a majority stake in €30 billion of real-estate assets from Spanish lender Banco Popular Español SA. The lender was rescued by European Union and Spanish authorities and sold to Spain’s largest lender, Banco Santander SA, for a token €1.
“This significant investment reflects our continued confidence in the robust recovery of the Spanish economy,” Jonathan Gray, Blackstone’s global head of real estate at the time, said in a statement in August. Mr. Gray has since become president and chief operating officer of Blackstone.
The EU’s executive branch said last week it expects Spain, the eurozone’s fourth-largest economy, to expand at an annual rate of 2.9% in 2018. Spain’s economy grew 3.1% last year.
Tourism looks to be maintaining momentum. More than five million tourists visited Spain’s beaches, museums and restaurants in March, a 9.6% increase from the same month last year, the country’s statistics institute said last week.
Domestic tourism—Spaniards traveling within their own country—also is on the rise. Spaniards cut back on luxuries like vacation when the financial crisis hit starting in 2008. Unemployment skyrocketed to a high of 27% in early 2013.
Now, more Spaniards are getting jobs and spending more, including on vacations. “Good years are ahead,” said Ignacio de la Torre, chief economist of investment bank Arcano Group in Madrid.
Blackstone is waiting to see if the Spanish market regulator approves its Hispania takeover effort as well as how Hispania responds. An answer could come as soon as early June or drag on if other investors launch counterbids.
Source: WSJ