Bankia to unload €400m of hotel NPLs

The nationalised lender is also off-loading Project Wind, a €1.3 billion portfolio of mixed assets including developer and SME loans.

Spain’s nationalised bank, Bankia, is marketing a €400 million portfolio of hotel loans, Project Castle. The loans, to hotel operators, are backed by just under 50 properties which are spread around the country and include both coastal tourist hotels and urban ones. Apollo, Starwood, and Oaktree are said to be among the bidders with initial offers in the €200 million to €300 million range, reported PDI sister title, Real Estate Capital

The sale is part of a bigger NPL clear-out for Bankia; it is also looking to sell a €1.3 billion NPL portfolio, Project Wind. The bulk of this, €900 million is non-performing mortgages, with €180 million of loans to SMEs and developers, and a further €210 million of unsecured loans.

Currently Spanish hotels are hot property, their attractiveness boosted by Spain’s improving economy and declining value of the euro. “There’s enormous appetite from private equity funds – it’s an important market globally,” says Mikel Echvarren, CEO of consultancy irea. “Domestic tourist and vacation demand for hotels is also growing significantly.” Last year, €387m of hotel loans changed hands in portfolio deals, and another €1.05 billion was invested in assets directly, according to irea’s research.

“Private equity funds are now diversifying away from hotels in the main urban centres – Madrid, Barcelona, and Bilbao – to opportunities in the Costa del sol, the Canary Islands and the Balearics,” notes Echavarren.

Last December, Starwood and Sankaty bought Bankia’s €800 million Project Amazon NPL portfolio, which included €370 million of hotel loans, secured on around 30 assets, mainly in the three to five star range in Catalonia, Valencia and the Canary Islands.

Echevarren expects 2015 to feature fewer hotel NPL sales. “Bankia is atypical because these loans were not transferred to Sareb; they are to hotel operators and not classified as real estate loans. It has provisioned heavily and wants to clean its balance sheet. Other banks have been restructuring loans so it’s unlikely we’ll see a large volume of hotel NPLs. It’s now easier to repair loans, so while banks may sell some over the next couple of years, it will not be as as rapidly and as aggressively as before.”