22 May 2015 – Cinco Días
The economic crisis takes its toll on the Ritz Hotel Brand
The investment vehicle of Alicia Koplowitz, Omega Capital, and the Belmond chain have finally sold Madrid’s Hotel Ritz to the Saudi Olayan family and the Mandarin hotel group. They should cash in about 130 million euros from this transaction, thus recovering the amount previously paid to the Meridian, when acquiring the hotel. Two years after, they had placed the ‘for sale’ sign on the property and authorized JLL to look for buyers.
Omega Capital and the Belmond chain, known as Orient-Express Hotels up until a year ago, bought the property in equal shares for 125 million back in 2003. The deal has marked Mandarin’s entry into the Madrid market at a time when the city has started getting the attention of major international hotel chains, following the announcement of the landing of the Four Seasons with the Canalejas complex, expected in 2017. The city is also awaiting to see who will manage the future hotel in Edificio España (‘Spain Building’ in English), owned by the Chinese Wanda group.
So far, the Asian luxury hotel chain only had presence in Barcelona, where it has been operating – since 2009 – the Mandarin Oriental Hotel, located on Passeig de Gracia and owned by Capital Reig Group. With this hotel, Mandarin will operate a total of 27 hotels, to which two new ones will be added, as already announced, in Milan and Marrakech.
Mandarin has managed to acquire a hotel with 167 rooms, which had already caught the interest of other international chains. Marriott even offered 130 million euros for it, but the transaction never went through. The same happened to Fairmont, which offered 120 million.
The sale represents Belmond’s exit from Madrid, as the hotel will soon be managed by Mandarin. Belmond will only maintain a single establishment in Spain – Belmond La Residencia – in Mallorca.
The Olayan investment group was set up in 1947 in Saudi Arabia. It boasts an assets portfolio consisting of real estate investments. This is its first venture into the hotel market, given that so far it has only acquired properties for offices, shops and housing, in addition to investment in energy, industry and food production. Its entry into the hotel segment follows that of other investment funds from the Middle East. A year ago, Katara Hospitality, from Qatar, bought Intercontinental Madrid for 60 million and Qatar Holding acquired 12 luxury properties in Europe.
A hotel in need of investors
The exit of Omega Capital and Belmond from the Ritz has been marked by difficulties in finding a buyer that would allow them to recover the amount paid in 2003 and, at the same time, be willing to make the large investment required by the property. Fairmont had calculated that an investment of 60 million was needed. Last February, Belmond announced it would invest 500,000 euros to renovate its façade and make it look as it did when it was originally conceived last century. The facade’s makeover is scheduled to take place in stages and its end date has not been specified.
The hotel was burdened by the bad situation which Madrid had fallen into as a tourist destination. It affected negatively the influx of tourists and caused a price drop in average room rates. However, the market started to rebound during the second half of last year and has been growing stronger so far this year. In the presentation of its quarterly accounts, Belmond assured it registered revenues of $190,000 over the first three months of this year from management services at Hotel Ritz. This figure represented $126,000 of profit, less than the $152,000 obtained last year.
Original story: Cinco Días (by L. Salces)
Translation: James Leahu
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Source:: AURA Real Estate Experts