American fund King Street invests 40 million in hotels and hostels in Portugal

The US investment manager King Street Capital Management announced on Tuesday an investment of up to 400 million euros in the Spanish group Room00, which manages boutique hotels and hostels on the Iberian Peninsula. Around 10% (40 million euros) of this amount is earmarked for Portugal, the New York-based company told ECO.

The money will be used to finance Room00’s pan-European expansion strategy, allowing it to grow in key markets such as Spain, Portugal and Italy. The funds will mainly be used to buy and refurbish hotel properties in premium areas in cities such as Lisbon, Porto, Madrid, Barcelona, Milan, Rome and Florence.

Room00 plans to expand its portfolio to 200 assets and 15,000 rooms over the next four years in southern Europe, as well as 20 assets (properties) and 1,000 rooms in London, where the company plans to open its first tourist unit by the end of this year.

Today, the group founded in Madrid in 2012 has more than 2,500 rooms and 50 assets in operation or under development, as part of a portfolio of brands created to address different traveller profiles: Room00 Hostels, Toc Hostels, Room Select Hotels and Letoh Letoh (boutique hotels with traditional rooms and others made up of bunk beds). They share a contemporary design and a privileged urban location.

“Room00 will continue to follow its growth model based on leasing and hotel management contracts, and will now also be able to acquire properties directly”, the company said in a statement sent to the media.

In Italy, it has chosen Kryalos SGR (from Milan) to structure a dedicated property investment vehicle. As far as Portugal is concerned, another property investment fund manager is to be selected, although details are not yet known.

Room00’s CEO, Ignacio Requena, believes that this investment by King Street “validates” the company’s business model and “will allow it to accelerate growth through the acquisition of strategic assets, attract the best talent and open up new opportunities for collaboration with investors who share” its long-term vision, both internally and for the urban hospitality and lifestyle sector.

“We see Room00 as one of the strongest, most innovative and scalable platforms on the European hospitality scene. Its fully integrated operating model and strategic focus on central locations make it a valuable partner for our growth strategy in European real estate”, said Paul Brennan, co-head of King Street’s Real Estate practice, quoted in the press release.

Room00 was advised by GRC IM, CBRE and the law firms Garrigues, Cuatrecasas and Across Legal, while Uría Menéndez and Allen & Overy Shearman provided legal support to King Street, which has more than 28 billion dollars (25 billion euros) under management. EY provided financial due diligence and PwC tax structuring.

In the summer of last year, Room00 and the Dorsa Holding group made a deal to grow in Portugal: they acquired 100 per cent of the shares in TOC Hostels, from entrepreneurs Ignacio Catalán and Salvador Torrens, for 20 million euros, in order to consolidate and expand the brand at Iberian level and in Italy. It is expected to generate 70 million euros in revenue in the first year of activity under the new shareholder structure.

Two months later, the Room00 group bought the Catalan competitor in the hostel business, Casa Gracia, for 10 million euros.