News that GIC has bought a 35% stake in southern Europe hospitality group, Hotel Investment Partners (HIP), from Blackstone should not come as a massive surprise to watchers of European real estate.
In an interview with PropertyEU published in March this year, GIC's head of European real estate Tracy Stroh explained GIC’s ‘bottom up’ approach that looks through global economic turmoil to invest in management teams of companies whose theme it believes in over the long term, resort hotels very much included. Neither does it take a geographic allocation approach. Instead, it remains flexible.
Each time, it will appraise an investment on a risk versus reward basis, said Stroh.
‘The key point is to be compensated for risk. We are agnostic so we look for where we can get the best risk-adjusted returns. But, we have a pretty flexible investment mandate. If we have a high conviction about an investment, and it’s scalable, and we believe in it over the long term, we shall invest. As a team, we are looking for “bottom-up” idiosyncratic opportunities where we can create that extra alpha to generate a risk-adjusted return.’
It seemed obvious that GIC would continue making hotel resort investments. In September 2022, the sovereign wealth fund agreed to become the leading shareholder alongside the management team in Sani/Ikos Group (SIG), a transaction that valued the company at €2.3 bn. SIG started out as a family-owned business in Greece and has grown 4x since 2015 with backing from Oaktree, Goldman Sachs Asset Management and others. It owns 12 unique resorts in Greece and Spain.
For that investment, GIC liked the management team, and thought it was well placed to capitalise on more growth. ‘What we try to do with our investments is not make it a “one and done”. We try to build the businesses we like. We ask the management team: can we grow with you? We would also add value by working with the management team as partners to assess what we are doing globally, connect the dots, and bring some of these teams together to capitalise on further opportunities.’
Its latest hospitality investment, Hotel Investment Partners (HIP), fits in.
The company is a leading owner of resort hotels in Southern Europe, and was founded in 2015 before being acquired by Blackstone in 2017, which is retaining a 65% stake in the business as it welcomes in GIC. Perhaps facilitating the deal was an agreement earleir this year for a €680 mln refinancing of the platform by Blackstone.
Since 2017, HIP has pursued an acquisition and repositioning strategy for well-located but under-invested hotels, investing over €600 mln of capital into the platform. It partners with major global hotel operators including Ritz-Carlton, Barceló, Melia, Hyatt, Hilton, Ledra and Marriott.
It currently has 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.
Speaking of the deal, Lee Kok Sun, CIO of Real Estate at 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.'
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. 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.’
Eastdil Secured and Morgan Stanley acted as advisors to HIP.