Castlelake in Talks With Abu Dhabi Over Sale of Luxury Hotel Group Hotei

A major hotel-sector transaction is taking shape in Spain. Abu Dhabi National Hotels (ADNH), the UAE-listed hospitality group, is in advanced discussions with US private equity firm Castlelake regarding a potential takeover bid for Hotei Properties, formerly known as Millenium Hospitality Real Estate.

The talks, first reported by Spanish media and later confirmed by the company, would involve a public offer for 100% of Hotei Properties, a listed real estate investment vehicle that owns a portfolio of ultra-luxury hotels in prime Spanish cities including Madrid, Seville, Bilbao and San Sebastián. While the financial terms of the potential offer have not been disclosed, the company’s assets were valued at approximately €557 million as of July.

Castlelake’s Exit Strategy in Spain

Castlelake, which controls more than 49% of Hotei Properties, has been working over recent months to divest its stake in the company, which trades on Spain’s BME Growth market. Under Spanish takeover regulations, exceeding the 30% ownership threshold requires any sale to be structured as a full takeover offer.

This move forms part of Castlelake’s broader withdrawal from the Spanish market. Earlier this year, the Minneapolis-based fund sold its 79% stake in Aedas Homes, its flagship Spanish investment, in a landmark transaction with rival developer Neinor Homes. That deal followed an unsuccessful sale process that had attracted interest from major international investors including Starwood, Hines and Sixth Street.

As part of its attempted exit from Hotei, Castlelake mandated investment bank Eastdil to explore strategic alternatives, though those initial efforts failed to produce a deal.

Management Changes and Renewed Talks

The process was further complicated by a high-profile legal dispute between Castlelake and Hotei’s founder and former chairman, Javier Illán, which ultimately resulted in Illán’s departure from the company. Following his exit, Castlelake transferred management of the hotel portfolio to Sancus Capital, led by Borja Escalada, which now oversees operations after acquiring a 10% stake.

Sources indicate that an earlier transaction with Abu Dhabi-based investors was explored but did not close. Negotiations are understood to have resumed in recent weeks.

A Portfolio of Five-Star Assets

Hotei Properties currently owns nine five-star hotels, following the sale last summer of the Fairmont La Hacienda resort in Cádiz to ActivumSG for €170 million. That transaction enabled Castlelake to receive close to €80 million via an extraordinary dividend.

The remaining portfolio consists entirely of luxury and ultra-luxury assets. Two hotels in Madrid — Nobu and Nomade— are still under development or renovation. The operational assets include the Radisson and Mercer hotels in Seville, the Nobu Hotel in San Sebastián, two major hotels in Bilbao operated by Meliá and Radisson, and two high-end properties in Madrid: the JW Marriott and El Autor Autograph Collection.

Strategic Implications

If completed, the transaction would reinforce Abu Dhabi National Hotels’ growing international footprint and highlight continued Middle Eastern investment interest in European luxury hospitality. For Castlelake, the deal would mark another step in its strategic disengagement from Spain after more than a decade of high-profile investments.