In 2018, Pygmalion Capital, along with CBRE Global Investment Partners, acquired a distressed portfolio of nine four-star hotels in major Spanish cities. After a period of asset management, Pygmalion successfully sold all nine hotels in 2025.
What happened during the intervening years is a story that took Pygmalion Capital into the finals of the HAMA Europe Asset Management Achievement Award 2026, having previously won the award in 2025.
The acquisition
The ‘Operation Nine’ portfolio consisted of 1,650 hotel rooms located in Seville, Madrid, Bilbao, San Sebastian, Santander, Tenerife, Valladolid and Ciudad Real. With 623 rooms, the Al‑Ándalus Palace in Seville was the largest and most valuable property in the portfolio.
Pygmalion is an opportunistic hotel investor that acquires distressed or special‑situation assets and creates value by repositioning them. The portfolio was originally acquired through the transaction of some non-performing loans (bank debt in default) and insolvency proceedings, explained Ramon Tomàs Ranz, Pygmalion’s head of asset management.
“We came to an agreement with the insolvency administrator and the owner and operator of the assets, Silken Hotels, a mid-sized Spanish operator,” he said. “And we kept Silken on as the tenant of those assets for the holding period of close to seven years.”
Value creation
While owning these hotels, Pygmalion delivered two rounds of capex and deployed operational improvements that resulted in unlevered IRR of nearly 10 percent per year and an almost doubling of the equity for investors.
Tomàs Ranz and his team deployed a series of initiatives to improve performance.
One strength in Pygmalion’s arsenal was its strong governance rights over the tenant Silken, he said: “We owned 40 percent of their rooms, so we were very influential. We pushed them to work in the ways we wanted to work, like deploying the Uniform System of Accounts for the Lodging Industry (USALI).”
“We reconfigured the F&B spaces of the hotels, increasing or decreasing outlets, so we had a lot of leverage for being a lease,” he added, “And also during Covid, we negotiated to increase our variable rent component from 65 to 67 percent of GOP, which resulted in more than €400,000 of variable rent for the portfolio in 2025.”
Capex allocation
Moving onto the deployment of capex, Tomàs Ranz, said that the main challenge was how to allocate the capex amongst the nine assets in the best way to prioritise ROI according to the markets, micro locations, and the potential of the assets.
“During the first round of capex in 2019-2020 we concentrated investment on the public areas, because the number of rooms was massive, and the capex of only €13m was limited,” he commented.
The Al‑Ándalus Palace in Seville accounted for more than 40 percent of the total investment, he said, which elsewhere was mostly used to make light-touch changes and address red flags.
ESG strategy
A second capex round specifically focused on ESG: “We strongly believed in the ability to increase the liquidity of these assets through improved ESG performance and metrics.”
“We started participating in the Global Real Estate Sustainability Benchmark (GRESB) in 2020 which was something completely new to us and allowed us to benchmark ourselves against our peers in the industry.”
The GRESB provides a score from 0 to 100 for ESG performance and enables owners to benchmark real estate and hotel assets against their peers. Tomàs Ranz and his team managed to raise scores at the hotels from 49 to 84, which, he said, is “remarkable for assets that are 25 to 30 years old.”
How? In addition to social and governance initiatives, for the environmental components, the team worked on improving Energy Performance Certificates (EPCs) at the hotels, especially through decarbonisation, which meant getting rid of natural gas or fossil fuels everywhere, except in the kitchens, where most chefs still have a strong preference for cooking with gas.
“Decarbonisation has had an impact not only on ESG metrics, but also return on investment. It has decreased the consumption, and in the current context, I think it's going to prove quite useful for the new owner,” he commented.
Operational improvements
Taking a closer look at performance, rather than trying to push occupancy higher, which was already around 80 percent, the Pygmalion team focused on increasing ADR and total revenue. As a result, GOP improved both in absolute terms and as a margin percentage.
They also recognised that the hotels were not brand‑new assets with cutting‑edge facilities, so they were never going to be market leaders. Instead, the goal was to move the portfolio as close as possible to the top performers by using limited capex intelligently and extracting maximum returns from operational improvements. At the same time, the hotels’ online reputation and global review scores were improved, which helped support higher profitability.
Sale and exit
The sales process took 12 months and completed in September 2025, said Tomàs Ranz. “We had the possibility to sell vacant possession, so we sold to a Spanish owner operator, even if our initial plan was another one.”
In the end, the entire portfolio was sold to Grupo Hotusa, the owner of the Eurostars Hotel Company, for €250m or €151,000 per key. Silken exited management of the properties, which are now marketed as Eurostars Hotels.
The competitive sales process included some twists and turns involving several bidders. In July 2025, the US fund LCN Capital Partners reportedly reached a preliminary agreement to acquire the portfolio for €225m, outperforming other bidders such as Fattal, Fortress, and Hotusa at that stage.
Ultimately, the LCN deal did not close, and Hotusa returned with the higher offer of €250m to secure the portfolio.
Overall, the investment delivered strong results for investors, said Tomàs Ranz. The holding period ran to seven years rather than the planned five, but the execution was successful: limited capex effectively allocated, profitability increased through a mix of operational levers, and pandemic challenges navigated.
In conclusion, he noted: “What differentiated this portfolio was the strong ESG strategy that we implemented, which was a good learning curve for us all.”
All quotes taken from the HAMA Europe Asset Management Achievement Award 2026 held in Berlin during IHIF EMEA.