Stoneweg’s acquisition of Cromwell Property Group at the end of last year marked the start of a new chapter for the Geneva-headquartered alternative investment group. With the enlarged firm controlling some €10 billion of assets across a much broader geographical area, it has also meant a sea change for Stoneweg’s acquisitions team, according to senior director of investments, Ariadna Nijssen.
“My role today covers pan-European investments, whereas before, I had a more Southern European focus,” she says. “Our remit spans everything from data centres to logistics, living and hospitality, to the cultural and leisure sectors.”
Nijssen notes that the firm’s living segment has expanded, by investment volume, to become its largest specialisation, totalling €3.9 billion of assets. But it is Stoneweg’s unique approach to leisure and hospitality which has made it something of a unicorn in Europe. Investing in assets as diverse as surf parks, museums and cultural centres, its hospitality strategy also includes smart urban hotels and flexible rental assets. “There’s never a dull day at Stoneweg!” Nijssen quips, acknowledging that hospitality remains one of the group’s most dynamic and fast-growing investment areas.
Hospitality’s bright future
Stoneweg assembled its hospitality team in the midst of the Covid pandemic, in 2020, noting some attractive dislocations in asset prices and foreseeing that the industry would have a bright future. “We have seen extraordinary growth since then,” she says. “Spain registered 26 million overseas visitors last year, and their average spend increased by 9 percent.” This is partly due to the recovery of US visitor numbers, she notes, despite headlines suggesting turmoil in American outbound tourism volumes.
A value-add strategy has seen the firm execute smart, if often highly complex, deals. “We are very focused on leisure hotels, but also urban destinations,” she notes. “We have seen that urban destinations have become leisure targets as well.” While Stoneweg wouldn’t invest in an asset which was “purely a business hotel, next to an airport” she also notes the rise of bleisure bookings, with business travellers blurring the lines with vacation travel. The firm has also benefitted from broadening demographics focusing on travel experiences.
In terms of acquisitions, the firm frequently pounces on three-star properties it can upgrade to four star and occasionally five-star hotels, although Nijssen doesn’t see Stoneweg as a luxury player. “We might do upper upscale but we tend to avoid the complexities of luxury hotels, as the exit can be more unpredictable,” she says. With each property subject to a five-to-seven-year business plan, the exit strategy is important. “The defining factor is that we have a very strong thesis and can add value to the property,” she says.
While the company’s Spanish connections – both founders have Spanish origins – has often meant an “in” to Iberian deals, the current hospitality strategy reflects the strong performance of Southern Europe. “We are looking at hotels largely in Spain, Portugal, and Italy – and expect Greece will follow,” she says.
Recent successes in Spain have been notable. From luring Hard Rock and Kimpton to Marbella, to new launches in Ibiza, Majorca and Menorca, and the recent deal, in partnership with the Lopesan Hotel Group, which will result in the creation of a new, high-spec hotel with 241 rooms that also ticks technological and sustainable boxes.
Leisure and culture
Yet while Stoneweg has demonstrated its expertise in the urban hotel segment, its appetite for experimentation has resulted in some out-of-the-box thinking. Chief among these is a punt on wave parks, designed to serve a growing sub-culture of surf enthusiasts. Nijssen compares the move to private equity giants betting on ski resorts years ago, gaining first mover advantage. “Surfing is an up-and-coming sport, which was included in the Olympic Games for the first time in Tokyo, in 2021,” she notes. “It was also huge at last year’s Paris Olympics in Tahiti.” She adds that while keen surfers will often travel far for waves – such as booking trips to Bali – variables in weather and water conditions can make this a big gamble. Stoneweg’s surf parks will guarantee the top-quality and constant waves in an amenity-rich environment, she says.
The first wave park is taking shape on a concession next to Athletico Madrid’s new stadium, which has been parcelled to cater for a range of leisure and commercial activities. “It’s been a steep learning curve,” she admits, “but we see enormous potential in the sport.” Stoneweg wants to create both a high-end private club for users, as well as day and even hourly passes for surf enthusiasts – and their families. “It’s likely that young surfers might be accompanied by a parent who won’t go in the water, so we are creating a destination with F&B, with flexible working and other amenities to suit everyone in the party,” she says. A second wave park will be built in Birmingham, UK, where Stoneweg has identified a dynamic catchment area for the sport that will be likely to include surfers from London.
Next challenges
Hospitality’s encouraging fundamentals may be underpinning Stoneweg’s recent successes, but they are also attracting other investors to bid for assets. Nijssen acknowledges the increasingly crowded dealmaking environment but says that they have a plan. “Hospitality investment requires deeper expertise than other asset classes - it has a purely experimental aspect,” she notes. “The best investors and operators can create an attractive value proposition even in a secondary location, but you need the right skills to do that.” While finding the right property for Hard Rock on the Costa del Sol was a coup in its own right, she notes that the Hard Rock Marbella has also ended up attracting notable levels of year-round MICE business, which the business plan perhaps hadn’t anticipated. She adds that relationships with alternative lenders – which were key in the post covid era and have continued to strengthened still further in recent times – also sets them apart, while a flexible approach to drafting contracts has deepened relationships of trust with sellers.
This flexibility has also blurred lines with its living strategy, where hybrid rental products are one of the firm’s latest innovations. Earlier in July, in fact, Stoneweg unveiled the Bext Valdebebas development in Madrid, in partnership with M&G, comprising 583 new homes offering flexible rental terms. “While this is part of our living strategy, the project has the license of an apart-hotel,” she says. “This blending of asset types is a huge focus for us. In Spain it has become impossible for many people to find a place to live, and hybrid living is one of the solutions to the problem.”
Just like the firm’s stand-out hospitality assets, amenity-rich hybrid living properties have the power to attract customers back again and again, she notes, and are vital in the Southern European landscape. “The average age of residential property in Southern Europe is around 40 years, but are we committed to creating new, modern buildings and making better living spaces,” she concludes.