CEO of UK-based investor talks luxury development and
other opportunities for the active European investor.
JERSEY, U.K. — The luxury segment has been underdeveloped in Spain
and Saul Goldstein sees a golden opportunity to cater to this growing demand
sector.
“There has been less luxury development in Spain as it has historically
been more of a mid-market destination,” said Goldstein, a founder and CEO of
Jersey, U.K.-based real estate investment manager ActivumSG. “The existing
tourism infrastructure means it is well-placed to absorb increasing demand from
tourists who are seeking luxury properties.”
This is partly due to longer summer seasons, Goldstein said, but also
because hotel owners and operators are expanding their amenity and service
offerings to cater to this growing segment of the market. Count ActivumSG
among that group as the company has executed on several transactions
post-COVID, as it eyes “an opportunity to capitalize on the market
dislocation.”
Goldstein uses ActivumSG’s acquisition of the Nobu Hotel Barcelona as a
prime example.
“The hotel had already been recently developed, but to drive further
value, we created Barcelona’s highest rooftop pool and bar to make it an even
more appealing destination for international luxury travelers, who are
increasingly seeking something special and experiential in terms of their
hospitality choices,” he said.
ActivumSG, which was formed in 2007 and has directly or indirectly
advised on over €10 billion in real estate and real estate-related investments
since then, primarily sits on the opportunistic end of the acquisition
spectrum, according to Goldstein. That often means getting involved with
distressed assets.
“We look to profit by acquiring, developing, or redeveloping assets in
excellent locations,” he said. “While taking on value-add risk and utilizing
moderate leverage, there can sometimes be an element of distress to the deals
that we do, where an owner is facing issues in the capital structure or
generational transition.”
After acquiring the asset, ActivumSG typically gets involved in asset
management initiatives done by its team, according to Goldstein.
We are open to executing across Western Europe and expect to be active this year due to the favorable market conditions we are currently seeing from a buyer’s perspective. Watch this space…
Saul Goldstein
“The asset’s location, alongside continued asset management initiatives,
will then be what drives growth in the long term,” he said.
While Goldstein said Spain has been a major investment focus lately, he noted that ActivumSG isn’t necessarily tied to one particular geography.
“We are open to executing across Western Europe and expect to be active
this year due to the favorable market conditions we are currently seeing from a
buyer’s perspective,” Goldstein said. “Watch this space…”
Hotel Investment Today spoke with Goldstein via an email Q&A about
bifurcation in Europe, partnering with Ennismore and the company’s acquisition
of Odyssey Hotel Group. His answers were edited for length and clarity.
Hotel Investment Today (HIT): In the U.S., we have been
witnessing a significant bifurcation in the hotel industry. Is it different in
Europe?
Saul Goldstein: The luxury segment of the market
continues to demonstrate resilience in Europe, with some regional
variations. Spain, for example, has had a well-established mid-market
offering with strong existing tourism infrastructure for quite some time;
however, the luxury segment remains underdeveloped in comparison to many other
European countries. At the same time, the country’s favorable climate,
agreeable lifestyle, heritage, and ease of access to other European
destinations mean that luxury travelers are increasingly looking to Spain.
Here, ActivumSG sees a real opportunity to cater to this growing demand
in the sector, which is also reflected in investor preferences. Recent market
dislocation has provided us with the opportunity to acquire, develop, and
redevelop well-located assets with sound fundamentals at highly attractive
discounts to peak pricing and/or replacement costs.
The story of the economy (or budget) segment in Europe is a bit more
nuanced. The middle service level has faced difficulties, but the ‘cheap and
cheerful’ segment offers a real opportunity. The lower-end, limited-service
part of the market is less developed in Europe than it is in the U.S., which
makes it interesting. For example, the tech-enabled serviced apartment
model offers the prospect of high operating profit margins alongside reliable
user experiences that cater to a diverse range of travelers and consumers.
Despite this, a lack of high-quality investable stocks remains in this
attractive sub-sector in Europe. This won’t be the case for very long, and we
expect to be active in this regard in the near future, starting in Germany.
Activum’s SLS Barcelona, the first SLS hotel in Europe, opened in May.
HIT: Can you talk about the development of SLS
Barcelona with Ennismore? What did you learn in the process?
Goldstein: We developed the SLS Barcelona with
the knowledge that if you create a great asset from scratch, then high-quality
operators will be attracted to it. This marks the first entrance of Ennismore’s
SLS luxury lifestyle brand into Europe, which speaks to the unique nature of
the hotel. It boasts a fully stacked 5-star amenity offering, alongside a
laid-back, playful vibe that reflects the city’s character.
We also knew that, due to new hotel development restrictions in the
city, we were presented with an opportunity to develop something truly special,
potentially one of Barcelona’s last ground-up hotel developments, especially on
the waterfront.
Navigating the complex planning and construction process in a market
constrained by stringent local regulation highlighted the critical importance
of having local expertise and strong partnerships, in this case with our
affiliated development manager, TechStone, and Ennismore.
HIT: Why was Odyssey Hotel Group an appealing
acquisition for your company (ActivumSG acquired the company in 2021) and how
much value has been created as a result? What are the growth opportunities
going forward?
Goldstein: Similar to some of the hospitality
investments we made in Spain, we saw an opportunity to capitalize on a
dislocated hospitality market during the pandemic with this asset-light
acquisition. This allowed us to acquire Odyssey Hotel Group, a pan-European
white-label hotel operator, off-market at a highly attractive entry
point.
We saw an opportunity to capitalize on a dislocated hospitality market during the pandemic with this asset-light acquisition. This allowed us to acquire Odyssey Hotel Group, a pan-European white-label hotel operator, off-market at a highly attractive entry point.
Saul Goldstein
Following the acquisition, our corporate transactions team has been
working closely with Odyssey to enhance senior management, scale the platform,
expand its pipeline and broaden the footprint of its major hotel brand partners
by entering new markets in Europe.
We plan to scale the platform across Europe
further. Its portfolio currently comprises 25 hotels (approximately 4,200 keys)
with an additional 15 hotels in the pipeline. It’s a highly flexible platform
that caters to a diverse range of hotel brands, making it quite easily
scalable.
HIT: Talk about why the Sutton Point acquisition in London was right for ActivumSG and how is the investment looking one
year later?
Goldstein: There was a strong element of
distress to this transaction, and like the Nobu Barcelona, it was a recently
developed asset. This reduced the capital expenditure outlay that you would
normally incur with this type of investment, allowing us to focus on driving
value through efficiency gains and operational performance.
We acquired Sutton Point at a significant discount to replacement cost,
but it has taken some asset management work to make it a more compelling part
of our portfolio. We purchased it as a mixed-use scheme, comprising a
combination of hotel, residential, retail, and office uses. Upon closing, the
non-hospitality elements of the scheme were successfully sold in multiple
back-to-back disposals. This significantly de-risked the transaction and
allowed for the retention of the two hotels (a 99-key Ibis hotel and a 59-key
Adagio aparthotel), where we are now able to leverage our extensive expertise
investing in hotels and working with hotel operators to enhance their
value.
ActivumSG acquired the Nobu Hotel Barcelona in 2021.
HIT: What were the biggest lessons learned from the
Travelodge bond entry and exit? How much of a profit were you able to make?
Would you do that type of investment again?
Goldstein: After a significant amount of
analysis underwriting the credit, we acquired Travelodge bonds in 2020 amidst
the pandemic, eyeing an opportunity to generate attractive returns for
investors through capitalizing on market dislocation. The transaction demonstrates
our ability to invest across the capital stack, enabling us to access the
European real estate market wherever we identify opportunities.
We correctly predicted the hotel market would rebound swiftly, and as
sentiment improved around U.K. travel, we were able to exit our position with
an unleveraged IRR of 40-plus. As an opportunistic/value-add manager, we are very
focused on unlocking value wherever it can be found, whether that is by
entering through a dislocated capital stack, a corporate platform with the
potential for margin increases and further growth and or via a direct, standing
asset. To answer your question, yes, we would consider this type of investment
again, as we have proven our ability to execute swift deals during turbulent
market periods.
HIT: You have several different redevelopment
opportunities late with the Palacio Solecio in Malaga, Spain, the Nobu Barcelona and the Hard
Rock Hotel Madrid. How are they different?
Goldstein: All of these transactions speak to
our ability to go into distressed or underutilized assets and seek to unlock
their potential. In this case, this was achieved through intensive
repositioning work, where we were able to utilize our Spanish team’s value-added
asset management capabilities.
The Palacio Solecio and Hard Rock were effectively derelict at the time
we acquired them, and involved complete turnaround processes and refurbishment
efforts to create something appealing to both customers and investors.
The Nobu Barcelona was a recently built, high-quality asset acquired
from a troubled seller during the pandemic. We still felt it was important,
however, to add further value by creating Barcelona’s highest rooftop and bar,
a complex undertaking given the initial state of the roof. More recently, we’ve
initiated further sustainability-related upgrades to create Spain’s highest
BREEAM-rated hotel asset (‘excellent’). We don’t like to rest on our laurels in
terms of creating further value where it can be achieved.