Paris-based Eurosic specializes in the acquisition, operating and management of real estate assets, and manages a portfolio valued at €7.7 billion (as of December 31, 2016).
Before taking on her new role, Derycke was previously international acquisitions manager for Eurosic. She moved to Madrid as COO and CIO for Eurosic Spain, and was involved in the set-up of Eurosic Investment Spain last year. Ahead of the conference, she spoke about the region’s appeal for investors and what criteria her team uses to select assets.
1. What brought you to the world of hospitality investment?
We have started looking at alternative investment class three years ago based on the main thesis that, 20 years from now, the population of Europe will be dominated by tourists and elderly people. Hospitality and healthcare have been our main focus for growth and we have been investing more than a billion euros on those sectors in France, Italy, Germany and Spain over the last two years.
In December 2015, the group created Eurosic Investment Spain, which is mainly focused in tourist assets. Since then, the team has grown a lot, to 10 people based in Madrid.
The group has always had a growth strategy based on diversification and partnerships with large operators in order to boost the sustainable growth of its portfolio. We believe that the tourism has been experiencing a strong growing trend (especially in Spain). It provides attractive yields, and there still are good investment opportunities. The investment strategy of Eurosic Investment Spain is focused on the acquisition of assets with a high revalorization potential through a repositioning strategy based on rehabilitation and the signing of long-term leases (12-15 years) with top-tier operators. Apart from the upside of adding value through the works, there is also the fact that a new operator will have a big margin to increase the operating figures and paying a higher rent. In this regard, we only invest in real estate leaving operations to our operative partners. So far, our main partners at European level are Pierre&Vacances and Club Méditerranée (aka Club Med).
2. How do you think the hospitality investment market has changed in Europe and/or the Mediterranean in the last year?
The hospitality investment has changed in Europe—and particularly in the Mediterranean—due to a couple of relevant factors.
First of all, there has been a strong change on the tourist destinations within the Mediterranean as a consequence of terrorism in some Arab destinations, such as Egypt or Turkey. This new context is translated into a strong increase of tourism in some other Mediterranean destinations where we can therefore find good investment opportunities. Spain is one of the countries where this effect has been more obvious as in 2016 there had been 75 millions of tourists (vs 68 million in 2015, + 9 percent). The expectations for 2017 are even higher: more than 80 million tourists are expected.
This localized market growth has also favored the economic recovery of some countries like Spain, Italy, Portugal or Greece that were hit very hard by the 2007 crisis. Nowadays, the competition is getting stronger and good opportunities are becoming rarer in comparison to the operations we did two years ago.
3. Which markets do you find most attractive in terms of investment now?
In terms of investment, the most attractive assets are touristic assets within the Mediterranean coasts with good infrastructures, with a preference for Italy, Spain and Portugal. Moreover, Spain has the main advantage to have a combination of good climate, good food and a lot of top-tier operators in tourism.
The Spanish hospitality market offers very good opportunities. Sea-side hotels in good touristic locations such as Balearic Islands, Costa de Sol or Costa Brava. Those are our favorite as they are a synonym of moderate risk of default and also because they can provide reasonable yields.
4. When assessing a property, what are your main criteria to decide whether it will fit in your portfolio? Have those criteria changed on the last year or do you expect them to change?
We won’t go through an opportunity if our operator’s partners don’t feel comfortable with it. That’s the base of our long-term partnership, we rely on its expertise.
The combination of large international operators with location all over the world and long term guaranteed leases is a good hedge against the terrorist “risk factor” that can happen everywhere.
5. What is the main message you would like to share with the audience at MR&H?
The message we would like to share with the audience is that we have good perspective for Spain, Italy, Greece and Portugal due to the collapse of northern Africa and Turkish destinations. Strong long term global trend for tourism which is good for the region. There are not so many pleasant places around the world to enjoy beach vacation and Europe is definitely one of the best options. The overheating in Spain will not last for ever, tourists will come back to Arabic countries, the hotels infrastructures are still there, they are good and Tunisia is already experiencing encouraging results.