International investments in the world famous resorts of Vale de Lobo and Vilamoura have been massively reported in the media during the last couple of months.
Vilamoura is a resort town in the heart of the Algarve, covering more than 2,000 hectares, of which 70 are building land (for hotels and more than 5,000 villas and apartments), the prestigious 825 berth marina, awarded Best International Marina in 2015 by the Yacht Harbour Association, 5 golf courses, a golf academy, a casino and the controversial “Cidade Lacustre”, a project which contemplates the flooding of thousands of hectares of agricultural land to create a luxury “lake city”. Due to its status as a resort, it is run by a management company (Lusort) which is responsible for the town as a whole.
The resort was founded by Portuguese banker Cupertino de Miranda who, with the resort’s management company Lusotur (now Lusort) started initial planning and building in 1966. In 1996 Vilamoura (i.e. Lusotur) was acquired by André Jordan, who in 2004 sold it to the Spanish group PRASA for 360 million Euros. The business was then renamed Lusort and was purchased in 2006 by PROCAM, a subsidiary of the spanish bank Catalunya Caixa, which acquired 50% stake in a a deal worth 180 million Euros.
This year, on March 26, US private equity fund Lone Star acquired Garvecat, the group responsible for developing the Vilamoura resort, including the management company Lusort, for 200 million Euros from Algarvetur and Catalunya Caixa.
This price, although a bargain, not only because it is a third of what the resort was worth 5 years ago and considerably less than PRASA Group paid the resort developer André Jordan in 2004, still is considered the largest real estate transacation in Portugal in the last 8 years and the largest of Portugal’s tourism sector in the last 10 years.
The acquisition was made by an affiliate of the Lone Star Real Estate Fund III, which was launched in October 2013 and boasts about 6.5 billion US Dollars.
Santander Totta acted as consultant and financial partner of Lone Star in this transaction, whilst international real estate consultants CBRE provided advisory services to Catalunya Caixa. According to the latter, it was an extremely complex deal, not only due to its scale, but also to the type of assets, including many plots of land, the concession of the best Portuguese marina and a significant number of already built properties, pointing out that Vilamoura is the oldest resort in Portugal and one of the most popular tourist destinations of southern Europe.
Lone Star aims to strengthen and revive the resort through a long-term investment plan, which will be executed by a team led by Paul Taylor as CEO of Garvecat, owner of the Monte da Quinta Resort in Quinta do Lago.
According to Vitor Aleixo, Loulé mayor, the sale of Vilamoura may represent a turning point for the Algarve adding that the transaction can mean a rebound in economic activity with an increased level of employment.
More important than the value of the sale, is the sale itself says André Jordan, arguing that the resort was stagnating due to Lusort’s inactivity, adding that from the contract I had with Lone Star, I know that they are committed to invest and call in other investors to develop and promote the project and the region.
Juan Pepa, Lone Star’s managing director for Portugal and Spain, said that Vilamoura represents a unique opportunity for international investors looking to capitalise on the ongoing recovery of Portugal and its real estate sector.
Lone Star was founded in 1995. Since its establishment, it has organised 14 funds with aggregate capital commitments totalling over 54 billion US Dollars.
US funds have been very active in Portugal. Last year they invested 330 million euros in property, a figure which represents 43% of the total property investment made in that year (770 million euros).