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Acquisition of Barceló’s Hotel Portfolio
A Compelling Platform for Further Future Growth
February 25, 2015
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2
Key transaction terms
Transaction
Summary
Transaction
Price
Economics
for BAY
Funding and
timing

Acquisition of a 80.5% stake1 in a newly-created joint-venture “BAY”, together with Barceló, which will
incorporate 11 Spanish vacation hotels (and 1 shopping center) plus an option for 5 additional hotels (and 1
shopping center), currently owned by Barceló, representing a total of +6,000 keys

Assets will be contributed to BAY in two separate phases: June 2015 and Q1 2016 (in case of option is exercised)

Hispania total equity contribution will range from c.€120m to €150m

BAY will become the platform for the creation of a pure resort hotel REIT focused on Spain

Transaction price
•
Purchase price of €421m, including €234m of debt and €187m of equity (ex. transaction costs), equivalent to
€67k2 per key
•
Hispania total equity contribution of c.€150 million for its 80.5% stake in the joint-venture

Attractive transaction multiples: 11.2x and 10.2x EV/EBITDA3 2014PF and 2015PF(B), respectively, below historical
average EV/EBITDA 1-yr fwd multiples for US Hotel REITs of 12.7x4 over the last 11 years (currently at 14-15x)

89.2% of hotels EBITDAR with a fixed rent component

2014PF and 2015PF gross rental income of €40m and €45m respectively

2014PF NOI3 5 yield of 7.7% and minimum gross yield guaranteed by Barceló of 6.4% (2015-2019 average)

Fully funded with Hispania’s own funds

First phase is expected to be closed by June 2015, with a deployment of funds equivalent to c.€100 million

Second phase is expected to be closed by Q1 2016, making a potential additional c.€50 million payment
Notes:
1
Barceló will have the option to reduce Hispania’s stake to 51% through capital increases
2
Excluding implied valuation of shopping centres
3
Pro-forma for the whole portfolio. Excluding transaction costs and refurbishment capex
4
Source: Equity Research as of February 2015
5
NOI equivalent to EBITDA minus maintenance capex
3
Transaction Rationale
Direct exposure to Spanish tourism industry combined with a strong cash yield generation
Direct Exposure to Spanish Tourism Industry
1
Strong Cash Yield Generation (Pro-Forma)
Gross Rental Income
Well-located hotel portfolio in the most remarkable Spanish
prime vacation areas, specially in Canary Islands,…
Yield %2
9.6%
EBITDA
10.6%
45
2
41
…and well-invested, with significant capital deployed
over the last years…
€m
€m
40
3
…combined with a low risk profile given
a highly diversified tourist base and limited seasonality…
2014PF
4
…have allowed steady growth over the crisis
This platform will benefit from further growth given
significant investment opportunities in Spain
as one of the largest vacation markets worldwide…
1
2015PF (B)
1
1
2014PF
Unlevered NOI3
Yield %5
5
37
7.7%
Levered NOI4
8.5%
Yield %5
11.6%
13.3%
28
36
€m
€m
25
32
6
1
2015PF (B)
…by entering into at the right time of the cycle,
driven by internal and international demand
Notes:
1
Pro-forma for the whole portfolio. 2015 based on Barceló’s budget. 2014/15 not illustrative of BAY’s P&L
2
Calculated over €421m
3
NOI post maintenance capex
4
4
NOI post maintenance capex and interest expense on expected total leverage of €234m
5
Calculated over total equity of c.€210m including transaction costs and financing of refurbishment capex
2014PF
1
1
2015PF (B)
2014PF
1
1
2015PF (B)
Based on Barceló’s budget for 2015. This financials are not illustrative of 2015 P&L of BAY
Transaction rationale (cont’d)
Direct exposure to Spanish tourism industry combined with a strong cash yield generation
1
Well-located hotel portfolio in the most remarkable Spanish prime vacation areas, specially in Canary Islands,…
High quality portfolio (+90% are 4*), located in prime consolidated vacation areas…
Total foreign
overnight
stays (million)
As of 2014YE
2. Balearic Islands
6 hotels
1. Andalusia
2 hotels
Keys
Revenues2
1
570
€11m
2
1,915
€33m
3
3,612
€104m
3. Canary Islands
8 hotels1
€148m
6,097
2
…which concentrate +50% of
total international overnight stays (%)3
185
190
Canary
Islands
27%
29%
Balearic
Islands
27%
25%
2013
2014
…and well-invested, with significant capital deployed over the last years…
Intense capex effort, especially focused on asset repositioning, but still opportunities to further enhance repositioning
37

Robust program capex already implemented,
with c.€120 million invested since 20074

+80% of total capex dedicated to fully
refurbish and reposition many of the hotels

Hispania estimates an additional €35 million
capex to further enhance portfolio positioning
3
17
13
€m
15
2007
Source: Barceló and INE
Notes:
1
Plus two small shopping centres
2
Hotel revenue including shopping centres
3
Excluding Andalusia region
4
€180 million capex invested since 2005
16
34
2
2008
8
2
6
2
4
1
7
11
2009
2010
2011
3
14
3
7
14
11
5
1
2012
2013
2014
Maintenance capex
Refurbishment capex
5
Transaction rationale (cont’d)
Direct exposure to Spanish tourism industry combined with a strong cash yield generation
3
…combined with a low risk profile given a highly diversified tourist base and limited seasonality…
Canary and Balearic Islands dependant from
an European diversified tourist base
Canary Islands enjoys a very limited seasonality:
Occupancy only below 80% levels in May and December
%
100
Germany
18%
30%
4%
Year
20141
UK
Nordics
6%
10%
Belgium &
Netherlands
France
32%
90
Weighted occupancy
rate for BAY portfolio
80
in Canary Islands
(2014)
70
Others
60
50
Jan-14
4
Apr-14
Jul-14
Sep-14
Dec-14
…have allowed steady growth over the crisis…
Revenue CAGR in 2007-14 of 3.2%
EBITDAR CAGR in 2007-14 of 4.3%
148
119
128
118
104
115
124
134
45
34
€m
31
€m
2007
2008
2009
2010
2011
2012
2013
2014
Source: Frontur
Notes:
1
Based on 22.8 million international tourists registered by the Canary and the Balearic Islands
33
32
2011
2012
27
23
2007
6
36
2008
2009
2010
2013
2014
Transaction rationale (cont’d)
Direct exposure to Spanish tourism industry combined with a strong cash yield generation
5
This platform will benefit from further growth given significant investment opportunities in Spain as one of the largest vacation markets…
Spain is third largest touristic destination worldwide…
…being 80% larger in terms of resort rooms than US
(million tourists)
Rank
Country
1
2009
2013
CAGR
76.8
84.7
2.5%
2
55.0
69.8
6.1%
3
52.2
60.71
3.8%
4
50.9
55.7
2.3%
6
700
+80%
Many available
investment
opportunities
385
‘000
rooms
…by entering into at the right time of the cycle, driven international and domestic demand
Steady growth prospects of key touristic nationalities
targeted by BAY…
…supported by first signs of recovery of domestic demand in
terms of GDP and household expenditure
GDP growth (%)
2013
2014
2015E
2016E
GDP y-o-y growth (%)
Household expenditure
Euro area
(0.5)
0.8
1.2
1.4
5.0%
4.0%
Germany
0.2
1.5
1.3
1.5
2.5%
2.0%
France
0.3
0.4
0.9
1.3
0.0%
0.0%
(1.9)
(0.4)
0.4
0.8
-2.5%
Italy
UK
1.7
2.6
2.7
2.4
US
2.2
2.4
3.6
3.3
Source: Tesoro Público, IMF WEO update as of January 2015, ISTAC, IBESTAT and INE
Notes:
1
According to latest data reported by Frontur, Spain reached the 65 million of international
tourists in 2014, implying c.7% increase y-o-y
-2.0%
2015E: 2.0%
2016E: 1.8%
-5.0%
-4.0%
-7.5%
-6.0%
08
7
10
12
14
10
11
12
13
14
Strategy going-forward
Unique investment opportunity to create a best-in-class hotel platform and become
the listed multi-operator pure vacation hotel REIT in Europe
BECOME FIRST LISTED PURE VACATION HOTEL REIT IN EUROPE
FURTHER ENHANCE LOW RISK PROFILE THROUGH INVESTMENTS IN CONSOLIDATED
DESTINATIONS ACROSS SPAIN WITH A DIVERSIFIED TOURISTIC BASE
MULTI-OPERATOR STRATEGY
TARGET CRITICAL MASS OF AT LEAST €1.0 BILLION ENTERPRISE VALUE
BECOME AN ATTRACTIVE ALTERNATIVE FOR YIELD INVESTORS PLUS POTENTIAL VALUE UPLIFT
DEVELOP PARTNERSHIP WITH A SPANISH HOTEL GROUP WITH PROVEN TRACK RECORD AS BARCELÓ
8
Strategy going-forward (cont’d)
Unique platform to be further developed by identified solid pipeline to gain a sizeable scale
Build up process to capture further profitable growth in the Spanish hospitality landscape and enhance portfolio diversification
“Portfolio expansion timeline"
>6,300 keys already secured
1
BAY PORTFOLIO



2
16 hotels in the Canary Islands,
Balearic Islands and Andalusia
2 small shopping centres
6,097 keys
JARDINES DEL TEIDE



Hispania‘s existing asset
1 hotel in South Tenerife
300 keys
Identified solid pipeline (>8,000 keys)
1
Development
PROJECTS IN EXECUTION

3 hotels in the Canary Islands and
Catalonia
c.900 keys

2
IPO
>€1.0bn1
IDENTIFIED PIPELINE

Nine additional projects in the
Canary Islands, Catalonia and
Costa Blanca

c.7,100 keys distributed across
the Canary Islands, Catalonia and
Costa Blanca
Disciplined and
thoughtful ongoing
development and
sourcing of new
vacation hotel
investment
opportunities, in
collaboration with
Barceló
BAY is targeting a high quality portfolio
1. To take advantage from current positive industry fundamentals;
2. With attractive entry prices;
3. Well-diversified in terms of geographies but with a clear focus on the Canary Islands, given
its limited seasonality;
4. Managed by a diversified renowned operators base, specialised in the vacation segment;
5. With upgrading potential to extract further value from the assets
Source: Hispania
Note:
1 Enterprise value
9
Transformational deal for Hispania
After the completion of the transaction, Hispania will have fully deployed all IPO net proceeds in a
portfolio of more than €900 million of assets
€534 million of net
proceeds raised in the
IPO – fully committed
As % of
total net
proceeds
75%
104%
20
553
151
IPO net proceeds
108%
573
402
Including phase I and
phase II, with a final
stake of 80.5%
Initial committed equity
invested1
Transformational deal
for Hispania in terms
of size and quality,
resulting in a portfolio
with a special focus
on hotel assets,
especially on the
resilient Canary
Islands vacation
segment
BAY will contribute
with substantial,
stabilized and longterm economics to
Hispania
Investment in BAY
Total initial committed equity BAY capex to be financed Total initial committed equity
2
invested
with new Hispania's equity
invested
Hispania will boost its managed asset portfolio value by 2.1x, after having deployed all net proceeds
Consolidated GAV (€m)
38
421
919
Retail
2%
Residential
11%
27
433
Hotels
60%
Hispania's 3
initial GAV

BAY
portfolio value
BAY committed Hispania's GAV
capex
post-transaction
& capex
Hispania will receive 89.2% of the EBITDAR
generated by BAY, with a fixed rent component
•

2015 committed
capex
Offices
26%
Minimum gross yield guaranteed by
Barceló of 6.4% (2015-2019 average)
Economics attributable to Hispania (2014PF)
€40
million
€37
million
7.7%
Revenues
EBITDA
Net yield
Long-term rental contract signed with Barceló
Source: Hispania and Barceló
Notes:
1
Including the attributable estimated committed capex for 2015
2
Estimated equity requirement to fund refurbishment capex of Barceló’s portfolio
3
10
Based on 2014 December appraisal values (except for Málaga Vincci hotel which includes
transaction value and acquisition expenses as the deal was fully completed in January 2015)
Closing remarks

€421 million high quality
hotel portfolio, with a
strong presence in the
Canary Islands
Transformational deal for
Hispania, with a strong
focus on the Spanish
vacation hospitality
industry

NET PROCEEDS FULLY
COMMITTED AND TOTAL
FIREPOWER QUASI USED
UP ON COMPLETION OF
BAY TRANSACTION

Extensive growth
plans based on an
already solid pipeline
of opportunities
Partnership with
Barceló, a leading and
fully integrated Spanish
leasure company
11

Appendix Barceló Group overview
Simplified transaction structure overview
The transaction will be structured into two separate phases set to be completed by Q1 2016, with a total
equity contribution by Hispania of €121-€151 million depending on final stake held by Barceló, which will
range between 19.5%-35.0%
Phase I: expected to be fully completed by June 2015

Contribution by Barceló to BAY of 11 hotels and one
shopping centres for c.€196 million of enterprise value

In June 2015, Hispania will acquire a stake of 80.5% in
BAY
•
HISPANIA
BARCELÓ
80.5%
19.5%
BAY
Hispania equity investment: c.€100 million

c.€70 million of debt attached to the assets contributed will
be refinanced with a syndicated loan1

Once the investment by Hispania is completed, BAY will
request for the SOCIMI regime
4 hotels
Isla Cristina
Cabo Gata
Jandía Playa
Jandía Mar
5 hotels
2 hotels
Cala Viñas
Hamilton
Ponent Playa
Pueblo Ibiza
Pueblo Menorca
La Galea
Varadero
Other
C. C. El Castillo I
La Marina
Thalasso SPA
Phase II: fully completed by Q1 2016

Simultaneously to the first phase, BAY will grant a put
option to Barceló to sell an additional hotel portfolio after
December 1, 2015 and, only if, certain conditions are
met
•


BARCELÓ
80.5%
19.5%
BAY
Additionally, Barceló will grant a call option to
BAY to acquire this portfolio only after March 2016,
if the put option is not exercised
11 hotels
Potential acquisition of five hotels and one shopping
centre by BAY for c.€225 million of enterprise value
•
HISPANIA
Phase I: already executed
in June 2015
Assuming a final equity structure 80.5%/19.5%,
Hispania would contribute, additionally, €50 million
in this second phase
Assets 1
Margaritas
Lanzarote
Fuerteventura
Castillo
C.C El Castillo II
Assets 2
Pueblo Park
Phase II: to be potentially
executed in Q1 2016
c.€165 million of debt attached to the assets contributed
in the second phase
Source: Hispania
Note:
1 Appetite for financing from Spanish banks already tested
Other
13
BAY portfolio overview
Portfolio overview
Asset
Category
Keys
% Total
Location
Fuerteventura
4*
486
8.0%
Caleta de Fuste
Castillo
4*
480
7.9%
Caleta de Fuste
SC Fuerteventura
Shopping Center
-
-
Caleta de Fuste
SC Castillo
Shopping Center
-
-
Caleta de Fuste
La Marina
Retail
-
-
Caleta de Fuste
Jandía Playa
4*
634
10.4%
Jandía
Jandía Mar
4*
485
8.0%
Jandía
2,085
34.2%
Fuerteventura
Lanzarote
4*
426
7.0%
Costa Teguise
La Galea
4*
305
5.0%
Costa Teguise
731
12.0%
Lanzarote
Margaritas
4*
484
7.9%
Mas Palomas
Varadero
3*
312
5.1%
Tenerife
796
13.1%
3,612
59.2%
LPGC / TEN
Canary Islands
Cala Viñas
4*
330
5.4%
Mallorca
Hamilton
4*
158
2.6%
Menorca
Ponent Playa
3*
432
7.1%
Mallorca
Pueblo Ibiza
4*
346
5.7%
Ibiza
Pueblo Menorca
4*
374
6.1%
Menorca
Pueblo Park
4*
275
4.5%
Mallorca
Balearic Islands
1,915
31.4%
Isla Cristina
4*
341
5.6%
Huelva
Cabo Gata
4*
229
3.8%
Almería
570
9.3%
6,097
100%
Andalucía
Total
14
Barceló Group overview
Barceló Group is an integrated hospitality player, active across the whole hotel value chain
Key highlights
Hotels breakdown 20141

By destination
Fully integrated and balanced portfolio, with strong Spanish
leisure presence in the high end market segment
•

Well diversified by segments (vacation, urban) and by
geography (over 140 hotels)
Solid commercial distribution system with a powerful network of its
own (over 800 travel agencies, Barceló Viajes) and in a strong
position toward other distribution channels
•
Strong relationships with tour operators: more than 5,000
contracts a year with over 500 international travel companies
•
Development of an online platform: own platform and
leading positions in over 150,000 tourist service websites
•
Increasing exposure to alternative distribution channels:
agreements with international airlines and a distribution
channel of over 600,000 agents worldwide
Managed
15%
Urban
38%
Vacation
62%
Rented
33%
Owned
52%
Barceló is a top hotel operator in Spain (2013)

Significant know-how of the hotel industry with a focus on
turnarounds and cost optimisation strategies providing reliability and
stability

Soundness operating profile, with 42% revenues CAGR over
2006-2013

Best-in-class management team committed towards long-term
growth, leadership and profitability

Acquisition track-record
•
By management
91
174
48
42
12.968
12.164
79
32
83
94
10.062
9.549
9.496
8.847
Peer 4
Peer 5
Peer 6
Peer 7
27.172
20.961
It has doubled the group’s size in Spain in less than 7 years
Key contracts with selected tour operators
Peer 1
Peer 2
Peer 3
Number of rooms
Source: Barceló and Hotel Market 2013
Note:
1 Breakdown by number of hotels as of July 2014
15
Number of hotels (#)