Azora launches new European leisure hotel fund with EUR680m in intitial commitments
Azora, a Madrid-based European private equity real estate manager, has raised EUR680 million for the launch of a new fund, Azora European Hotel & Lodging, EUR80 million above the Fund’s initial EUR600 million target.
With a hard cap of EUR750 million, the Fund has an implied total capacity of more than EUR1.5 billion to invest in leisure hotel opportunities across Europe, with a significant proportion of the portfolio expected to be located in Spain, Europe’s most popular “sun & beach” destination.
Commitments were signed throughout the lockdown period and demonstrate investors’ continued confidence in both the long-term performance of the tourism industry despite the impact of Covid-19, and in Azora’s ability, as a leading manager in the European leisure hotel space, to source attractive opportunities.
Azora EH&L received strong support from a group of leading global investors, including one of Europe’s largest pension fund investors, non-European sovereign wealth funds, and a large global institutional investor. Investors will also have the option to provide co-investment capital alongside their commitments, further expanding the investment capacity of the Fund.
The Fund will focus on the “sun & beach” segment across Europe's top tourist destinations, where it will implement a value-add strategy through repositioning, refurbishment, and active asset management. In addition, the Fund will target city tourism through new and innovative “smart urban lodging” concepts, which focus on the needs of young-at-heart travellers of all ages and provide flexible accommodation set ups and offerings that can be adapted in accordance with demand.
Azora has already secured a portfolio of 10 hotels comprising 2,800 keys and located in resorts on the mainland Spanish coast (7), Ibiza (2) and Sicily (1), which are managed by MedPlaya and Palladium, two of the largest Spanish hotel operators, as well as four city centre assets in Madrid, Lisbon, Brussels and Bilbao, which will be repositioned as urban lodging concepts, offering 1,200 beds in aggregate.
Azora believes that regardless of the short term impact of the Covid-19 crisis the European hotel market represents a compelling opportunity underpinned by attractive supply-demand dynamics, where constrained supply is driven by a c1.1 per cent CAGR in number of keys since 2009, versus c4.9 per cent CAGR in international tourist arrivals in Europe. Furthermore, it is a highly fragmented market which has attracted limited institutional capital investment to date, with 62 per cent of the European hotels being independently owned compared to just 30 per cent in the US, resulting in an opportunity to source underinvested and undermanaged assets for repositioning.
Azora has a strong track record of hotel and leisure investment and was the first institutional real estate investor and asset management firm to enter the “sun & beach” hotel segment in Spain, where it built the largest hotel platform through its Madrid listed SOCIMI (Real Estate Investment Trust), Hispania. From IPO in 2014, Azora grew the Hispania portfolio to 46 hotels with over 13,000 keys and a c. EUR2.0 billion of gross asset value, before successfully selling the platform to Blackstone in July 2018.
“This fund is a continuation of our successful strategy in the hotel segment, which began more than 10 years ago with the turnaround of Carey and which we further developed from 2014 onwards, with the build-up of the largest “sun & beach” hotel portfolio ever assembled in Europe, within our listed SOCIMI, Hispania.” says Concha Osácar, Azora’s Founding Partner. “During these extraordinary times, the level of commitments we have achieved so far for the Azora European Hotel & Lodging fund underscore the international investor community's confidence in both our ability as a manager to create value, and in the ongoing potential of the European hospitality industry as an institutional asset class, regardless of the short term impact of the COVID crisis, which we also believe will result in additional opportunities over and above those envisaged in our original business plan.
“We are very pleased to have held such a successful launch and are proud to count on the support of such a distinguished group of top-tier global institutional investors.”