Investor Profile: Stoneweg seeks big-name partners in European push

H10 Andalucia Plaza Marbella
Andalucía Plaza hotel complex in Marbella. (Stoneweg Hospitality)

Managing director Miguel Casas checked into Stoneweg to spearhead the property investment firm’s expansion into hospitality in April.

Just two months later, his new, dedicated platform agreed a joint venture with one of the biggest names in alternative investments. 

Bain Capital Credit and Stoneweg Hospitality bought the 400-room Andalucía Plaza hotel in Marbella in June. 

Through their joint venture, they aim to renovate the property and reposition it as “a new hotel experience in one of the best locations on the Spanish coast,” according to a statement at the time. 

It follows Stoneweg Hospitality’s first acquisition, at the end of last year, of a portfolio of four hotels based in S’Algar in Menorca for €30.5 million

The S’Algar deal includes 465 hotel rooms and apartments; Stoneweg plans to increase its capacity to 492 rooms. The firm said Alua, which already managed hotels owned by buyout firms Blackstone Group and Kohlberg Kravis Roberts, would operate the assets.

Casas joined Stoneweg after 10 years at real estate advisory firm CBRE, where he most recently worked as head of hotel investment properties for Continental Europe. 

His dedicated platform of Stoneweg Hospitality consolidates Stoneweg’s management and advisory practices in the hotels sector.

Stoneweg said at the time of his appointment that the firm had already built a hotels portfolio with 1,500 rooms in southern Europe. 

Casas’ strategy is to partner with big-brand investors. He’s planning on offering large players joint venture partnerships in which Stoneweg can provide local expertise and deal executives on the ground.

It follows a similar strategy for Stoneweg’s residential deals, he says. Recent such deals include the acquisition of seven vacant buildings on Dublin’s Cork Street in Ireland, in a joint venture with an undisclosed local property investor and developer in September.

What the resource large firms are missing, says Casas, is a local team that can execute deals, manage the assets and reposition them to new target markets.

“A figure like Stoneweg can be very agile for funds that don’t have that speed and flexibility on the ground,” he said.

Casas’ relationship with Bain goes back to CBRE, where he advised Bain on credit deals in the real estate market. CBRE’s website described his role as head of investment properties for continental Europe as playing “an active role in brokerage and buy side strategic advice, where he maintains a constant connection with international investors seeking to deploy capital in hotel real estate in Spain”.

“Bain brings to us immense value [through] their expertise in the capital markets, in the financing side… Their size and the respect that they have as one of the top private equity firms in terms of assets under management in the world is huge. It’s something that levers us as a joint venture and we’re able to have maximum visibility in every single market.”

Bain Capital Credit had $49 billion in assets under management as of March and 167 investment professionals targeting deals in North America, Europe and Asia-Pacific, according to its website.

“Our expertise in the Spanish hospitality industry will allow us to invest strategically in the facilities and reposition the venue to reach its full potential, in partnership with Stoneweg,” Fabio Longo, a managing director at Bain Capital Credit, said in a statement at the time of the Andalucía Plaza deal in June.

Launching a hospitality strategy during a pandemic may sound fraught with challenges out of the firm’s control. But Casas is bullish.

“It’s the right time to come in and we have a few good years coming, especially in the leisure segment and there’s going to be several markets which are going to be doing even numbers above what they were doing in 2019…” he said. 

“We can yield pricing very intelligently now through digital management of data and also [environmental, social and governance] policies will make our hotels more efficient on the cost side.”

It comes as more than a third of investors plan to acquire more hotels in Europe, according a survey of senior executives from large buyout firms, real estate investment trusts and other institutional investors published in July by property consultancy Cushman & Wakefield.

It found just a fifth planned to reduce their hotel acquisitions and only 10% had paused their investments.

Respondents frequently cited lower hotel valuations as a result of the pandemic as one of the drivers of increased activity. However, 59% expected investment opportunities at modest discounts to 2019 levels, of 15% or less.

There’s €1.2 billion to invest in single assets, portfolios or operating platforms through Stoneweg Hospitality’s joint venture with Bain.

In addition to this partnership, Stoneweg Hospitality as several other joint ventures with capital partners in hotels in Spain and Italy, according to Casas.

“We have the capital to invest” he said. “We will surely find the right deals of the right size and the right price in this market. I am very optimistic about the ability of the hotel industry to come out of these two years of difficulties. From September onwards, the opportunity is going to increase and we’re more ready and lined up to do transactions.”

Spurring the team is an expectation that demand for leisure will outpace supply, offsetting less travel for work. 
“We want to deploy the capital in the next year or two and probably after we’ve deployed that, we will look to see where the next opportunity lies in the hotel space. Stoneweg is pan-European, we can work across any geography and as we go along the cycle, we will probably identify different opportunities – maybe in different geographies or typologies.”

But the widespread labour shortages – partly stemming from the decision of many hospitality staff to retrain after the pandemic forced businesses to close - are among the challenges on Casas’ mind. 

Meanwhile, capital expenditure is under greater pressure thanks to the rising cost of refurbishment, driven by supply chain issues. 

Thirdly, higher energy prices are likely significantly affect the hotel industry, says Casas. 

Energy efficient renovations and finding hotel operators that excel in managing human resources will be integral to mitigating these challenges, he adds.

Stoneweg's Miguel Casas will be speaking at Questex's upcoming Resort & Residential Hospitality Forum in the Algarve between 25 and 27 October.