Portuguese banks sell luxury hotels portfolio to Davidson Kempner fund

  • ECO News
  • 7 December 2021

Davidson Kempner acquires luxury hotels such as the Conrad Algarve, Cascatas Golf by Hilton and the NAU group, in a deal worth around €900 million.

The Davidson Kempner fund has won the race to buy a portfolio of luxury hotels, amongst other real estate assets, from Portuguese banks, with whom it will now negotiate exclusively, according to sources.

Behind was the consortium formed by Bain and Cerberus, which also submitted a proposal to buy the restructuring funds of ECS, a company founded by the former governor of the Bank of Portugal António de Sousa and Fernando Esmeraldo, but that was insufficient to convince the national banks.

The operation was classified as Portugal’s real estate deal of the year. At stake is a portfolio of luxury hotels, including the Conrad Algarve, the Cascatas Golf & Resort Spa by Hilton and the NAU group, of La Vie shopping centres, among other real estate assets. The transaction could be worth around €900 million, according to the newspaper Jornal Económico.

It is expected that the deal will be concluded during the first semester of 2022, with banks and investor now moving into exclusive negotiations in the near future. On the table will be a bank loan that may exceed 60% of the purchase price, as ECO has already revealed.

Novobanco, BCP and Caixa Geral de Depósitos are the banks with the largest exposures in this group of assets, with Santander and Oitante (a financial vehicle created to manage Banif’s assets that were not purchased by Santander) also holding participation units in the ECS funds.

The operation is important for financial institutions as it will allow them to clean their balance sheets of non-strategic assets that heavily penalise banks’ capital ratios. However, it remains to be seen what impact the deal will have on their accounts. This situation could happen because if the units are sold for less than what the banks have been accounting for in their balance sheets, this will mean additional losses for the banks.

This is not Davidson Kempner’s first deal in Portugal. In 2019, this US fund bought the “Nata 2” portfolio from the bank led by António Ramalho in a deal that turned out to be controversial because of the losses it generated for the Resolution Fund.