GIC expands European hospitality holdings with HIP acquisition, sells stake in Australian mall

SINGAPORE: On October 31, Singapore’s sovereign wealth fund GIC announced its acquisition of a 35 per cent stake in Hotel Investment Partners (HIP), a luxury hotel owner, from Blackstone.

This strategic move is aimed at harnessing the thriving resort market in southern Europe. With this acquisition, GIC adds an impressive 72 more hotels to its portfolio of European hospitality assets.

According to an announcement by GIC, the organization is keen to leverage the anticipated post-pandemic resurgence in international tourism.

Commenting on the investment, Alejandro Hernández-Puértolas, founder and CEO of HIP, said: “This partnership with GIC, alongside the controlling interest from Blackstone, is a further vote of confidence in the HIP business and the resort hospitality sector in Europe. ”

“The partners’ cumulative size, scale and capital will bolster our ability to continue the transformation of the hotel landscape in Southern Europe.”

Mr Hernández-Puértolas believed that the fundamentals of the Southern European hotel market continue to be strong with revenue booked for the balance of the year over 20% ahead of last year.

Lee Kok Sun, Chief Investment Officer, Real Estate, GIC, said: “We are delighted to be partnering with Blackstone and invest in one of the most established Mediterranean Europe hospitality platforms.”

“We look forward to working with Blackstone and HIP’s management team as they continue to deliver on HIP’s strategy to enhance existing assets, while capitalising on the growing global and domestic demand for high-quality Mediterranean resorts.”

GIC’s 35% stake in HIP

HIP was founded in 2015 and was acquired by funds managed by Blackstone in 2017.

GIC will become an approximately 35% shareholder, with funds managed by Blackstone continuing to be a majority shareholder in HIP, with approximately 65% ownership of the company.

Since 2017, HIP has pursued an acquisition and repositioning strategy for well-located but under-invested hotels, investing over EUR 600m (approximately US$643 million) of capital into the platform.

HIP partners with major global hotel operators including Ritz-Carlton, Barceló, Melia, Hyatt, Hilton, Ledra and Marriott.

Today, the company boasts a portfolio of 72 hotels, totalling over 21,000 keys across Spain, Greece, Italy and Portugal, with 10,000 people employed across its hotels. Fifty-four of its hotels are certified BREEAM Very Good.

HIP’s value-add strategy and GIC’s Mediterranean hotel portfolio expansion

HIP has strategically built its asset portfolio by adopting a value-add approach, acquiring underperforming properties and actively seeking avenues to optimize returns, as reported by Mingtiandi, a prominent news media outlet covering Asia’s real estate and outbound investment news.

Emphasizing their operational strategy, the company focuses on comprehensive hotel renovations, prudent allocation of capital expenditures, asset enhancements, and leveraging the expertise of their in-house design, brand, and technical teams, as detailed on their official website.

GIC’s recent investment in HIP adds to its expanding Mediterranean hotel portfolio. This move follows their majority stake acquisition in the Sani/Ikos Group, a Greek luxury resort owner, in a deal that valued the 10-hotel portfolio in Greece and Spain at a notable €2.3 billion (US$2.3 billion) in September 2022.

In addition to the key holdings secured through the Sani/Ikos acquisition, GIC also maintains ownership of prominent hospitality establishments such as the Madrid Edition, Westin Palace Barcelona, and Hotel Arts Barcelona through its collaborative venture, Archer Hotel Capital, with Dutch pension manager APG Asset Management.

Rising tourist arrivals propel interest in Spanish hotel assets

Mingtiandi noted that as Spain experiences a significant rebound in international tourist arrivals post-pandemic, institutional investors are increasingly drawn to Spanish hotel assets.

Notably, the country witnessed a remarkable 20 per cent surge in foreign tourist arrivals, totalling 57.7 million in the first eight months of 2023, as highlighted by official Spanish government statistics.

In the face of a challenging credit landscape due to rising interest rates, GIC’s equity investment demonstrates a strategic move amidst the global real estate investment climate.

A noteworthy development for HIP’s parent company, Blackstone, was the successful refinancing of the business in March, facilitated by a substantial €680 million (approximately US$729 million) loan from Morgan Stanley and Credit Agricole, according to local Spanish media reports.

This transaction is indicative of the growing trend of institutional investments in Spanish hospitality assets. Notably, the total investment in the country’s hotel sector surged to €3.3 billion in 2022, marking the third-highest level on record and surpassing pre-pandemic levels for the second consecutive year, as outlined in a comprehensive report by Colliers.

According to separate statistics unveiled in Colliers’ Hotel Investment Report for Spain H1 2023, the luxury hotel segment in Spain has notably emerged as a focal point for investors, attracting a significant 52 percent of total capital commitments in the first six months of 2023.

Vicinity reclaims full ownership of Chatswood Chase Sydney, Repurchasing 49% Stake Sold to GIC in 2017

Mingtiandi also highlighted GIC’s decision to divest its investment in the Australian property market, even as the sovereign wealth fund continues its robust expansion in the Mediterranean hotel portfolio.

Vicinity, a prominent retail property group in Australia, recently reclaimed full ownership of Chatswood Chase Sydney by repurchasing the 49 per cent stake it had sold to GIC in 2017.

The sale price of A$307 million (approximately US$200 million) represents a significant discount of 6.5 per cent from the property’s June valuation, as disclosed in Vicinity’s recent financial statements.

In an asset swap six years ago, GIC had acquired the shopping center at a valuation of A$562.3 million, exchanging its 50 per cent stake in Sydney’s Queen Victoria Building, The Galeries, and the Strand Arcade, which had a combined valuation of A$556 million at the time.

GIC’s investment in Australian property market and portfolio expansion to Europe

Despite these divestitures, GIC maintains an active presence in the Australian property market, as demonstrated by its recent investments.

In October 2022, the fund invested A$400 million in a condominium venture. Earlier, in June 2022, GIC established its Australian headquarters in Sydney, and subsequently acquired a 50 percent stake in an Amazon-anchored Melbourne office project for A$800 million.

Furthermore, GIC’s portfolio expansion extends to Europe, as seen in its collaboration with US-based multi-family investor Greystar to acquire Student Roost, a student accommodation provider with 23,000 beds.

Additionally, the sovereign fund partnered with APG to invest in the Amsterdam-based student housing platform, The Social Hub, last year.