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Blackstone Group is selling a stake in Spanish hotel group Hotel Investment Partners to Singaporean sovereign wealth fund GIC, in a move that will provide capital for the business to expand at a time when borrowing costs are soaring.
GIC will acquire a 35 per cent stake in the company in a deal that values HIP at more than €4bn, according to a person familiar with the terms.
The decision to raise more equity comes as borrowing costs have risen for real estate investors in a higher interest rate environment. Last week, Canary Wharf raised £300mn in new money to help fund its expansion.
“We aren’t exiting, we are bringing in a capital partner to help support the growth of the business,” James Seppala, Blackstone’s head of European real estate, told the Financial Times.
He added that the uncertain economic outlook meant that it was “prudent” to cut leverage levels at businesses that Blackstone owns.
“We are bringing in more equity because in this environment, we feel it’s better,” Seppala said.
The impact of higher interest rates on the cost of financing takeovers coupled with economic uncertainty has weighed on dealmaking this year and prompted some regulators to warn of the potential impact on sectors such as real estate.
The acquisition of the stake marks the latest bet by GIC on the European hotel sector, as investors wager that high-end holiday destinations will defy fears of an inflation-driven slump in consumer spending.
Blackstone bought HIP in 2017 from Banco Sabadell two years after it was founded, and has overseen a rapid expansion. The business, which buys hotels across southern Europe and refurbishes them before leasing them out to hotel operators including the Ritz-Carlton, Hilton and Marriott, has since increased its portfolio more than fivefold.
It now has 73 hotels across the Canary Islands, the Balearic Islands, Italy, Greece and Portugal. Recent new openings include an all-inclusive resort in Mallorca.
Alejandro Hernández-Puértolas, chief executive of HIP, said the deal was a “further vote of confidence in . . . the resort hospitality sector in Europe”, with revenue booked for the rest of the year up more than 20 per cent compared with a year ago.
GIC has ramped up its investment in the real estate sector. Real estate assets made up about 13 per cent of its total assets as of March this year, up from 10 per cent a year earlier.
Earlier this year, GIC announced it was teaming up with BlackRock and the British Airways pension scheme to invest in a large mixed-use real estate project in London’s King’s Cross district.
The year before, the sovereign wealth fund bought a majority stake in Mediterranean luxury resort operator Sani/Ikos Group in a €2.3bn deal, one of the largest for a European hotel group since the Covid-19 pandemic.
In addition, it bought stakes in the Paddington office estate in London and in two university accommodation providers. GIC was also among the parties interested in buying UK holiday business Center Parcs from Brookfield earlier this year.
Blackstone has been actively investing in European real estate in 2023.
“Over half of our investment activity in real estate this year has been in Europe given greater dislocation and pressure on sellers in the region,” Blackstone president Jon Gray said in a recent earnings call.