Commerz Real plans Madrid office-to-hotel conversion

Commerz Real, the real estate investment arm of Commerzbank, will turn a Madrid office into a two-star hotel, for the maiden investment of its Commerz Real European Hotel Fund.

The German fund manager said it had acquired the 10,000 m2 office property at Madrid Airport through its Luxembourg-based company CR Fund Management, from Spanish firm Inmobiliaria Valtiendos.

Financial details were not disclosed.

Commerz Real has signed a deal with Zleep Hotels to create a two-star property with 280 rooms, due to open in 2021. The lessee and operator is a subsidiary of Steigenberger Hotels.

Currently, the office on Avenida de Aragón in Pegaso City business park is virtually empty, enabling the conversion project to commence in 2020. Spanish project developer Ridasame will create a restaurant, a lobby and a fitness area as well as the hotel rooms. The property already benefits from 220 underground car parking spaces.

'Not only is Madrid becoming ever more popular with tourists and business travellers, it is also profiting from a relatively constant number of guests across the whole year. Thus a consistently high capacity utilisation is guaranteed for the hotel,' said Dirk Schuldes, global head of hospitality at Commerz Real.

According to data from the hotel analysis company STR, the number of overnight stays in the Spanish capital has increased by an annual average of 4.7% in recent years; the figure for 2018 was around 19.7 mln. Moreover, since 2013 the room occupancy rate has increased by about 13.4%, to 75.1% in 2019.

In cooperation with Deutsche Hospitality, the umbrella brand of Steigenberger Hotels, Commerz Real's new hotel fund is seeking to invest in up to eight European hotel properties.

The desired fund volume is €250 mln with an equity capital ratio of around 40%. Steigenberger Hotels is participating with a sum of €12 mln. The annual target yield is at least 5.5%.

Following the most recent purchase of two office properties in Barcelona for the open-ended real estate fund HausInvest, Zleep Hotel Madrid Airport is already the third property to be acquired by Commerz Real in Spain in recent weeks.

Commerz Real was advised on the transaction by MMMM Monerereo Meyer Abogados (legal matters), SDH (tax) and CVO Group (technology).

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