Azora, Blackrock & Mazabi bet on Spain’s hostels market

Mazabi has purchased a 2,600m² building in Seville’s city centre, located between the streets of Tetuán, 17 and Jovellanos, 6. The fund manager has reached an agreement with Hostel brand Room007 who operate 3 other hostels in Madrid and plan to enter Malaga and Lisbon shortly. The Seville hostel will have c. 70 beds and is expected to open in 2021.

Meanwhile, Spanish fund manager Azora continues to advance in its plan to launch its own hostel operator. According to Mónica Garay, head of the fund’s Hostels division, Azora expects to have launched by summer 2020 its «first two hostels, one in Bilbao and the other in Brussels. In 2021 we will expand to other countries”. The fund’s first hostel will be located on nº3 of Bilbao’s Plaza Circular.

The hostels segment has also attracted BlackRock Real Assets who have acquired a pan-European hostel portfolio as part of a €100 million euro joint-venture with Amistat International, a market-leading hostel operator. The off-market acquisition comprises a seed portfolio of three assets, with an active pipeline of another six assets. The transaction is consistent with BlackRock’s value-added strategy, focusing on value creation with an allocation to low-beta alternative sectors, such as student housing and hostels.

Thomas Mueller, European Head of Value-Added Real Estate at Blackrock, comments: “this transaction presents an opportunity to gain early-mover access into an increasingly institutional but undersupplied asset class. The demand profile for hostels is particularly appealing given the lack of quality, modern stock in the market, which is characterized by fragmented ownership and very low brand penetration.”

While the presence of institutional capital in the hostel market has historically been limited due largely to the disjointed market and difficulty in accessing stock and achieving scale, interest is growing from institutional investors who have invested or expanded in recent years and for whom the acquisition of a portfolio of operational assets should be attractive.

Frank Orenstein, CIO and Partner at Amistat adds: “We see Amistat as a pioneering lifestyle brand that offers stylishly-designed, safe and tech-infused social hubs aimed at experience-hungry youth travellers of the 21st century. In our hostels we are offering shared – and private rooms, both with ensuite bathrooms, bars, dining/cooking areas, work-spaces, chill-out zones, high-tech connectivity and engaging activity programmes. For the young travellers the “living like a local” experience is gaining more and more importance”.