Melia hotels international sold seven hotels to starwood capital group for a 176 m
MeliÃ¡ Hotels International reach a binding agreement with Starwood Capital Group for sale, 176 million euro, seven resort hotels in Spain, which will continue to manage. The hotel assets will be acquired by a Joint Venture formed to 80% by a subsidiary controlled by Starwood Capital Group and 20% by MeliÃ¡ Hotels International, subject to the authorization of merger of the EU and to obtaining final approval of financing.
Will invest about 30 million euros in the renovation of hotels over the next two years, thus strengthening the relaunch of the Sol Hotels brand. The new Joint Venture will seek the integration of more hotels, so it will be a growth vehicle, both establishments currently owned by Melia or third parties. The agreement supports the commitment of Melia to reduce debt and to lighten the weight of assets in property, according to the company. The agreement includes the continuity in the management of the properties by MeliÃ¡ Hotels International under the Sol Hotels brand.
“The know-how and excellence Manager of Melia combine with the financial strength of Starwood in an Alliance that hope to deepen in time, and that will contribute to improve our balance sheet and boost our leadership in the segment of hotels, the greater strength at the international level”. Gabriel Escarrer, Vice President and CEO of MeliÃ¡ Hotels International.
Begins a “fruitful relationship”
operation between Starwood Capital Group, an American investment fund especially focused on Real Estate, and MeliÃ¡ Hotels International marks the beginning of a “fruitful relationship”, according to Spanish, and also fits into the plan launched a few months ago by the hotel to transform and completely reset the Sol Hotels brand, comprising much of the portfolio of resort hotels of the group.
The seven hotels involved in the operation, with a total of 2,933 rooms, are the Melia Gorriones (Fuerteventura), Sol Lanzarote, Sun Prince (Malaga), Sol Ibiza, Sol Pinet Playa (Ibiza) and Sol Mirlos Tordos Sun (both in Palmanova, Majorca). These hotels be renewed according to the new concepts of Sol Hotels. Therefore the parties have arranged a joint investment plan that contemplates, starting from this winter of 2015, the renewal of settlements and their adjustment to the new standards of the brand, for immediate repositioning in accordance with the new segmentation of customers of hotels.
After the changes, the hotels
Sol Principe, Sol Lanzarote and Sol Mirlos Tordos Sun will operate under the renewed concept Sol Hotels (also, Sun Blackbirds and thrushes Sun changed its name to Sun Palmanova), Sol Ibiza will be Sun Beach House Ibiza, and in 2016, Sol Pinet Playa will become Sun House Pinet Ibiza. MeliÃ¡ Gorriones will continue to operate as such, although the current annex will be called Sun Beach House Fuerteventura.
This Association “will create unique opportunities to expand the new concepts of Sun Hotels in different destinations, and the operation confirmed the great interest from global investors to have presence in the Spanish hotel market”, according to a statement from the Spanish chain. The fact that this agreement has given its fruits on the basis of a Joint Venture to re-launch the brand Sun “confirms the interest of market investment in Melia Hotels International and represents a unique opportunity for growth for both parties, both at the national and international levels”, adds.
Operation has an important financial dimension, Melia delves further into the objective of reducing debt via rotation of assets, which, along with the improvement of the business and other positive impacts, give the company a greater financial strength to grow strategically through the management, and face a new Strategic Plan to be drawn up for 2015 for the next three years. The entire operation was advised by CBRE.
A value proposition for funds
Alliance with large maximum solvency (AAA) international funds to facilitate rotation and enhancement of first quality rentals assets is not a new practice for Melia, who two years ago already agreed to the sale, continuing with the management, old hotel Sol S’Argamassa Ibiza, now converted as ME Ibiza, the Regional London British Fund. In his first season, the new ME Ibiza was the first hotel in Balearic Islands accepted into the exclusive “club” Leading Hotels of the World, being also awarded by the International Hotel Awards as the best renovated hotel across Europe, and having increased their income average per room (RevPAR) by almost 300% after the transformation.
More recently, Melia has incorporated other important North American Fund, Avenue Capital, as a partner to undertake the project CalviÃ¡ Beach. Avenue came a few months ago in the Joint Venture that Melia maintains for the renewal of its hotels in Magaluf (CalviÃ¡ Beach project) to acquire the ownership of the shares of the former partner, offering comfort to undertake between 2015 and 2016, among other actions, one of the most important for the transformation of Magaluf: the demolition and reconstruction, offering complementary leisure and shopping, and with a superior, of the old hotel Sol Jamaica.
The formula of introduction of large international funds in the ownership of assets of the chain, becoming financial partners of first order, has given so far important fruits to Melia, to favour the improvement of the product and the revaluation of the hotel brands to enhance their expansion, as it values the chain. Also mature destinations improvement projects are revealed as a way to attract significant foreign investment that otherwise would not come to these communities.
The agreement signed with Starwood Capital Group is part of a new strategy to strengthen the segment of hotels vacation mid-scale, not just in Spain.