Santander to sell €170m of hotel debt

Most of the 17 properties backing the loans are in areas popular with tourists including Valencia and the Canary Islands.

Santander is selling a €170 million portfolio of hotel loans, Project Formentera, PDI sister title Real Estate Capital reported.

The loans are backed by 17 properties located across Spain. Twelve of the 17 hotels are in the southern city of Valencia and the tourist hotspot, Canary Islands.

Santander is believed to be wary of holding the debt long-term as it lacked the expertise to manage the hotel assets should it be forced to foreclose.

With overseas investors intensifying activity in Spain and the economy and tourist trade recovering, the Spanish bank is keen to take advantage to offload the non-core assets.

Its total non-core Spanish real estate loan portfolio was valued at €4.3 billion at the end of last year of which 74 percent was non-performing.

Santander’s hotel debt sale follows Bankia’s marketing of another €400 million portfolio of hotel loans in March. Project Castle is backed by 50 hotels located across Spain and Apollo Global Management, Starwood Capital and Oaktree Capital Management are said to be among the bidders.

Spain’s second largest bank, BBVA, has also opened bidding for 14 hotels in an operation called Project Otelo.

“Banks are not really comfortable having hotel debt in their portfolios. Hotels are a particular asset and need specialised management in order to preserve and increase their value,” said Miguel Vázquez, partner at consultancy firm irea.

“Some banks such as Sabadell are setting up companies like HIP (Hotel Investment Partnership) to manage all its hotel assets and to create value for the future. Others are choosing to sell their debt portfolios considering the amount of investor interest at this moment.”

More than €1 billion of Spanish hotel debt was sold in 2014 associated with 93 hotels. Commerzbank, Bankia and Sareb sold the assets in three separate deals to Lonestar and JP Morgan, Starwood and Sankaty, and Cerberus respectively. About two thirds of the hotels were urban with the remaining in holiday destinations.