The Property Handbook 3.0 Investment & Financing Keys Spain 2018 Executive Summary

July 2018 Financial Advisory I Real Estate & Hospitality

@ 2017 Deloite Financial Advisory & Hospitality 1 ► 5th consecutive year of historical record in tourist demand: 81.8 m tourists visited Spain in 2017, +8.6% Financing compared to 2016 (75.3 m). First signs of growth deceleration during 2017Q4, from +4.5% in Q3 to 2.9%, Activity due to political uncertainties and progressive recovery of 4 The Hotel Property 2 alternative destinations. Handbook 3.0 ► Hotel Openings and full Repositioning recovery ► Strong appetite by Spanish Supply & Spain 2018 consolidated during 2017 (+74 and 12,535 rooms), traditional lenders to finance Demand while Hotel Refurbishments reached cruise speed after a Hotel Properties on a general EXECUTIVE SUMMARY strong rebound in 2015-2016 (+124 hotels and 17,293 basis due market gaining rooms). Dynamic future supply Pipeline with +30,600 momentum. rooms expected for 2018-2020. ► Key Performance Indicators continue their upward trend ► Increasing financing demand for for the 8th consecutive year, with +10% RevPAR growth prime development projects, over 2016 data. Vacational destinations evidence a slight including refurbishment, RevPAR growth deceleration with +8.8% CAGR 13-17). repositioning and greenfield. Macro While Urban destinations are on the up, registering +9.3% RevPAR CAGR 13-17. ► Caixabank, Santander, 1 Overview ► >65% of Spanish Hotel supply is obsolete with an avg. age Sabadell, are the most active of c. 9.3 years. Smart CapEx investment (c.€2,200m) is senior loan facilities providers so 2017 has been a landmark year far for this asset typology. for the Industry, top priority for 2018 in order to face the high competitive context and achieve operating metric premiums. however, there are some uncertainties on the spotlight ► GDP growth: +3.1% 2017 (+2.5% 2018F). Hotel Properties Key Investment ► Tourism accounted for 11.2% of the total Investment Market Indicators Spanish GDP 2017, far above EU’s average 3 5 (9.6%). (latest data available). 4* Hotel ► Worldwide Hotel Properties investment decreased by GOP (€k/room) Cap. Value (€k/room) Yield (€) Category data Min. - Max. Min. - Max. Min. - Max. ► The unemployment rate in 2017 was 10% in 2017 with €51bn. 16.4% (vs. 9.1% in the Euro Area). Spain Vacational Hotspots reached 18.9m employees, the best figure ► EMEA investment allocation accounts for 30% of Andalusia €6k - €12k €60k - €125k 6.50% - 7.75% since 2008. worldwide activity, registering +5% growth vs. 2016 data. Catalonia €5k - €8k €50k- €80k 7.00% - 7.75% C. Of Valencia €6k - €8k €60k- €100k 7.00% - 7.75% ► Hotel Properties segment keeps gathering ► Tourism-related employments grew by Balearic Islands €6k - €15k €125k - €150k 6.25% - 7.25% momentum in Spain, registering €3,090m, +44% over 4.4% CAGR (2013-2017) and represented Canary Islands €6k - €20k €120k- €200k 6.25% - 7.00% 2016 transaction volume, accounting for 29% of the 12% of the Spanish employments in 2017. Urban Hotspots total non-residential investment. ► Spain attained the world’s 1st place in the Barcelona €16k - €22k €300k - €400k 5.00% - 5.50% WEF’s & Tourism Competitiveness ► Optimistic 2018 prospects with €2,400m in €16k - €20k €250k - €350k 5.25% - 5.75% Index Report (2017) for the second transaction volume as at 2018YTD. There is currently Valencia €10k - €14k €100k - €180k 6.25% - 6.75% consecutive time (published biannually). an investment pipeline in Spain of €4,200m expected Malaga €16k - €20k €200k - €300k 5.50% - 5.75% to be traded in the following months. Sevilla €10k - €14k €120k - €200k 6.25% - 6.50% @ 2017 Deloite Financial Advisory & Hospitality Source: Deloitte 2 Hotel Global Investment: The Big Picture Despite the over-optimistic context, the total international investment activity (€51bn) has experienced a 10% downturn when compared to 2016. The Hotel Property Handbook 3.0 Spain 2018

EXECUTIVE SUMMARY

EMEA Transactional volume 30% €15bn (+5% vs 2016) (25% in 2016)

Americas Transactional volume EMEA region with €15bn registered, 47% €24bn (-25% vs 2016) Asia Pacific 30% of total international (57% in 2016) Transactional volume 23% €12bn (+17% vs 2016) investment. (18% in 2016) Tier 1 2018 -2019 prospects are cautiously Tier 2 optimistic since upcoming challenges Tier 3 Source: Deloitte, RCA are@ still 2017 Deloite to Financialbe seen. Advisory & Hospitality 3 While European Mega-Deals are paving the ground… The European Hotspots are rather heterogeneous.

The Hotel Property Handbook 3.0 2017 Single Asset Spain 2018 2017 Mega-Deals Most active Sub-Markets Volume Var. 17-16 EXECUTIVE SUMMARY London €2,500m +24% Ashkenazy Acquisition acquires Amsterdam €1,600m +112% Grovenor House Hotel 494 units in London European Top Buyers and Sellers Paris €1,090m -7% 627 Last 24 months Madrid €952m +76% Kuwait Investment Top 5 Buyers (Last 24 month) Acq (€) Props Berlin €783m -15% Authority acquires Fonciere des Murs €1,930m 56 Barcelona €642m +2% Hilton London Metropole Pandox €1,502m 30 506 1,059 units in London Investment Consortium lead by Kuwait Invest. Auth €1,486m 5 Fattal Hotels €1,244m 36 Anbang Insurance DekaBank €1,148m 16 acquires Doubletree Amsterdam Top 5 Sellers (Last 24 month) Acq (€) Props 356 557 units in Amsterdam Lone Star €1,920m 84 Blackstone €1,872m 53 Deka Immobilien acquires Capital €1,264m 22 W Amsterdam Brookfield AM €875m 11 260 238 units in Amsterdam Invesco €656m 16 Westmont Source: RCA – Real Capital Analytics Props: Nº of Properties acquires Doubletree Westminster 221 460 units in Westminster Investment activity in European Wenaasgruppen Hotel Properties reached a acquires 215 Bella Sky Comwell record high of €15bn in 2017, 812 units in Copenhagen

representing a +5% increase on Data: Million €

Source: Deloitte, RCA 2016.@ 2017 Deloite Financial Advisory & Hospitality 4 Performance remains aligned with investment flow Iberian Peninsula should be a key target for investors.

The Hotel Property Handbook 3.0 Spain 2018 European Cities 2018 Europe RevPAR FORECAST EXECUTIVE SUMMARY RevPAR ADR: €110.5 WHO’S UP? Occ.: 71.9% WHO’S DOWN? growth (%) RevPAR: €79.5 +6% 2016-2017 Outperforming markets 2017 - 2018 vs. 2016 Key Insights! Madrid +11% Porto +10% The spotlight reflects cautiously Prague +10% Optimistic forecast due to some geo-political upheavals. Healthy markets  Robust Economic Outlook Dublin +8% Amsterdam +7% • GDP Growth rates for the Eurozone have Dublin Amsterdam Berlin beaten expectations with +2.4% in +8% London +10% +0% Lisbon +7% 2017. This solid growth is set to continue in +6% Frankfurt Milan +4% 2018-19 with +2.3%. -2% Prague Paris +4%  Upsurge of Tourism Dynamics Paris +11% Barcelona +3% +7% Zurich • International tourism demand registered Rome +2% -18% record-Breaking figures with c.671 million Geneva Berlin +1% visitors (+8% 2016), +5% expected for Milano -15% 2019. +9% Underperforming markets • Southern European destinations registered a +13% growth of international visitors. Porto Rome Geneva 0% Barcelona • The RevPAR solid rise has been +18% -1% Madrid -3% Frankfurt 0% underpinned by Europe’s hotel Lisbon +4% London -4% Occupancy level increasing by +10% above +21% the 2008 levels. Zurich -4%

Source: Deloitte, STR, HVS @ 2017 Deloite Financial Advisory & Hospitality 5 Capital Values (€k/key): Madrid, Barcelona and Lisbon outperform their European peers.

The Hotel Property Handbook 3.0 10 Year

Bond 16) Spain 2018 - 2016-2017 (4th May 2017) 0.78% 1.40% 0.05% 0.05% 1.79% 1.79% 0.69% 1.29% 1.79% 0.55% 0.57% 1.29% 0.96% 1.68 % 0.70% ▲ 2 bps ▲ 35 bps ▲ 11 bps ▲ 11 bps ▼ 46 bps ▼ 46 bps ▲ 8 bps ▼31 bps ▼ 46 bps ▲ 13 bps ▼ 13 bps ▼31 bps ▲ 10 bps ▼170 bps ▲5 bps

Yield 2017 – Dif. 10 key (2015 372 bps 260 bps 495 bps 470 bps 346 bps 396 bps 431 bps 396 bps 396 bps 370 bps 443 bps 421 bps 479 bps 382 bps 580 bps Value perCapital EXECUTIVE SUMMARY years bond Cap. Value (€K/key) 674 586 503 439 403 399 392 350 332 307 281 305 276 273 256 247 €800k

4.7% Europe has experienced a global yield (2.5%) €600k (0.4%) compression since 2013, which has (0.1%) 2.3% resulted in significant rise in Capital 6.4% 5.8% €400k 7.1% 4.4% 3.3% 2.2% 14.1% Values. 3.3% 2.7% (3.0%) 14.8% Overall, European Values are only 5% €200k

below their market peak in 2007. 2017

- 2016 2018 - 2019 (%) Growth Values Capital

European Hotel Market 2017

Drivers: -

Paris Geneva Amsterdam Barcelona Copenhagen Dublin Lisbon Zürich Rome Florence Milan Munich Madrid Europe Stockholm  The Eurozone is on the pace of expansion after €800k London recovery from a period of financial crisis.  Outperforming growth of peripheral Eurozone

Economies. €600k  Long feeder markets are gaining momentum lead by China.

€400k Disruptors: ? Uncertainty related to Brexit. ? Supply and demand imbalance, whether from supply €200k constrains or oversupply projections, hindering performance. ? Non- regulated and uncontrolled tourist accommo- - 2006 Trend key per Value Capital dation growth is having an impact on hotel overnights. ? Alternative Destinations are experiencing a @ 2017 Deloite Financial Advisory & Hospitality Max. Min (2006-17) 2016 2017 6 progressive recovery Source: Deloitte, HVS European Investment allocation dilema The classic lose the pace while Madrid, Barcelona and Lisbon gathers momentum

The Hotel Property Handbook 3.0 Spain 2018 High

Capital Value Underweight Cash-Cow EXECUTIVE SUMMARY €K/key €700K

Europe Key Investment Indicators (2017): RevPar Capital Value City Yield (%) €550K 2017 (€) (€k/key) Paris €86 €674k 4.50% London €87 €586k 4.00% Zürich €102 €504k 5.00% Geneva €76 €440k 4.75% Rome €73 €403k 5.25% Florence €78 €400k 5.75% €400K Amsterdam €78 €392k 5.00% Barcelona €74 €350k 5.25% Milan €56 €332k 5.75% Munich €58 €307k 4.25% Madrid €51 €306k 5.50% Copenhagen €46 €281k 5.00% €250K Lisbon €88 €248k 5.50% Porto €70 €205k 5.50% Source: Deloitte

Quadrant Understanding Question Overweight €100k Underweight Cash-Cow Low High 3,5% 4% 4,5% 5% 5,5% 6%

Yield Question Overweight RevPar (€) (%) Source: Deloitte, Exceltur @ 2017 Deloite Financial Advisory & Hospitality 7 European Investment Hotel Market Spain accounted for 22% of the total investment activity. The Hotel Property Handbook 3.0 Halley Portfolio (Spain) with €631m of Investment Volume was the Spain 2018 main transaction in Europe in 2017.

EXECUTIVE SUMMARY

22% of 2017 Total Hotel Investment €627m €631m €506m €550m Belgium Poland Norway 1% 1% 1% €272m Switzerland 1% Russia Spain United Kingdom France United Kingdom Spain United Kingdom 1% 29% Sweden España Hilton London Westin Paris- Grosvenor Halley 2% Building Metropole Vendôme House Hotel Portfolio Netherlands Spain Ireland 22% 9% Hotel Hotel Hotel Hotel Hotel France 3% Germany 10% Italy 18% 3%

Source: Deloitte BUYER BUYER BUYER BUYER BUYER RIU Hotels Henderson Park Henderson Park Ashkenazy Acquisition Blackstone

VENDOR VENDOR VENDOR VENDOR VENDOR Grupo Baraka Tonstate Group GIC Sahara India Pariwar Banco Sabadell n.a. units 1,059 units 428 units 494 units 3,709 units

Ritz Cartlon Abama 5* - 461 Rooms Source: Deloitte @ 2017 Deloite Financial Advisory &HI Hospitality Partners Portfolio 8 European Hotel Investment breakdown Spain accounted for €4,295m of Top 12 European Hotel Investments.

Purchase # Country Asset / Portfolio Units Buyer Vendor The Hotel Property Handbook 3.0 Price (€m) Spain 2018 1 Spain Halley Portfolio 3,709 631 Blackstone Banco Sabadell 2 United Kingdom Grosvenor House Hotel 494 627 Ashkenazy Acquisition Sahara India Pariwar 3 France Westin Paris 428 550 Henderson Park and Kuwait Inv Authority GIC 4 United Kingdom Hilton London Metropole 1,059 506 Henderson Park and Kuwait Inv Authority Tonstate Group, PBC Group and Destiny Ltd 5 Spain Building Torre España 650 272 Riu Hotel Group Baraka Group EXECUTIVE SUMMARY 6 Spain Starmel Hotels JV 2,068 230 London & Regional Properties Starmel (JV Starwood Capital and Meliá) 7 United Kingdom Doubletree Westminster 460 221 Westmont Blackstone 8 Germany Hotel Hamburg 556 200 Wenaasgruppen Azure Property Group 9 United Kingdom Park Plaza London Waterloo 494 184 CBRE Global Investors PPHE Hotel Group 10 Spain Bay hotels (24% stake) n.a. 172 Hispania Barceló Hotels & European Yields & Capital Values (2017): 11 Spain Hilton Diagonal Mar (Stake 45%) 195 150 Axa IM Iberdrola Inmobiliaria 12 Germany Munich City Centre 582 136 Invesco Apollo Global RE Cap. Value Lease Mngmt. 13 United Kingdom Hilton London Olympia 405 131 HPL Hotels Westmont, Oaktree Cap. Value City Country CAGR (13- Yield Risk 14 Germany Upper West 580 123 Signa Group RFR Holding (€k/key) 17) (%) Premium 15 Italy Nova Yardinia 790 120 Serenissima SGR Greenblu, Valentino Village / SO.F.IN. (Sofin) 16 Spain Villaitana Hotel 455 114 HI Partners Xeresa Golf Paris France €674k 0.1% 4.50% 100 17 Spain Lopesan Sub-Portfolio 856 104 HI Partners Lopesan London UK €586k (1.6%) 4.00% 150 18 United Kingdom Birmingham 445 102 Fattal Hotels, Pandox Amaris Hospitality Zürich Switzerland €504k 0.1% 5.00% 75 19 Germany Hotel Pullman Munich 337 102 CDL Hospitality REIT Grove International, Event Holding GmbH Geneva Switzerland €440k 0.7% 4.75% 75 20 Spain Intertur Hotels Portfolio 1,126 100 KKR and Dunas Capital Intertur Hotels Rome Italy €403k 2.8% 5.25% 100 21 United Kingdom Hilton London Heathrow (T4) 398 91 Pandox Davidson Kempner Florence Italy €400k 6.4% 5.75% 100 22 United Kingdom Jurys Inn Croydon 240 90 Pandox and Fattal Hotels Amaris Hospitality Amsterdam Netherland €392k 7.4% 5.00% 75 23 Germany Arcotel John F 193 86 Rheinische Versorgungskassen LaSalle, Arab Investments Ltd 24 Germany Holiday Inn Leuchtenbergring 279 Real IS AG Munchner Grund Barcelona Spain €350k 9.5% 5.25% 75 84 25 United Kingdom Jurys Inn Glasgow 321 82 Pandox and Fattal Hotels Amaris Hospitality Milan Italy €332k 4.0% 5.75% 75 Munich Germany €307k 3.4% 4.25% 125 28 Spain Silken Barcelona 240 80 Benson Elliot Bank of America Merrill Lynch Madrid Spain €306k 13.4% 5.50% 75 30 Spain Ritz-Carlton Abama (Stake 50%) 461 75 HI Partners Familia Polanco Copenhagen Denmark €281k 7.0% 5.00% 175 32 Spain Blue Sea Portfolio 2,446 70 Portobello Blue Sea Europe €276k 3.6% 5.75% 125 33 Spain Cala Romántica Hotel 267 70 Grupo Batipart n.d. Source: Deloitte 54 Spain Silken Puerta de América 315 48 Bank of America Merrill Lynch Grupo Urvasco (Silken) 62 Spain NH Málaga 133 41 Hispania - SOCIMI NH Hotel Group 66 Spain Dolce Sitges 263 40 Talus Real Estate Oaktree 67 Spain Pueblo Camino Real 524 40 Logitravel n.d. 7 Spanish transactions are included within 77 Spain Tryp Barcelona Condal Mar 178 37 n.d. Acciona 88 Spain Valle Romano 430 Apartamentos turísticos 850 32 HIG Neinor Homes the Top 25 European deals. 95 Spain B&B portfolio (8 activos) 782 30 Corum AM B&B Hotels 96 Spain MiM Sitges 77 30 Leo Messi Francisco Sánchez  Blackstone’s purchase of Halley Portfolio 108 Spain Vincci Selección Posada del Patio 106 27 Internos Global Investors Dos Puntos (14 hotels and 3,709 rooms) was the most 109 Spain Sandos San Blas 331 27 Socimi Bay Hotels&Leisure Hispania relevant transaction within the European 110 Spain Innside Madrid Génova 65 26 Grupo Armando Álvarez EDTL Investment Market accounting for Note: Investment Markets analysed - Spain, UK, France, Germany and Italy. Source: Deloitte c.€631m.@ 2017 Deloite Financial Advisory & Hospitality 9 Who is playing the development game? Dublin, Lisbon and Munich have taken the lead with double-digit activity ratio while Madrid and Barcelona are surprisingly lagging behind… The Hotel Property Handbook 3.0 Spain 2018

CENTRAL AND EASTERN EUROPE

133 million EXECUTIVE SUMMARY NORTHERN EUROPE 10% world market share

85 million 44 €bn 6.4% world market share 4% world market share Top European cities are 62 €bn plucking up the construction and 6% world market share development of new rooms. Existing Ongoing Ongoing Top 6 cities in Europe rooms hotel rooms Ratio London 142,037 78 7,500 5% Munich 40,531 19 4,000 10% Istanbul 57,029 20 3,900 7% Moscow 49,341 16 3,600 7% Dublin 22,000 31 3,200 15% MOSCOW Lisbon 21,400 30 2,700 13% LONDON Main cities in Spain Madrid 55,583 11 2,100 4% DUBLIN MUNICH Barcelona 74,091 6 1,507 2% Vacational destinations in Spain Balearic Islands 167,557 29 6,394 4% WESTERN EUROPE SOUTHERN MEDITERRANEAN EUROPE Canary Islands 108,301 19 4,570 4% Source: Deloitte 194 million LISBON BARCELONA 259 million 14.7% world market share 19.5% world market share MADRID INSTANBUL 121 €bn 146 €bn The hotel construction rebound is a 12% world market share positive indicator of where demand is 14% world market share growing. TOP 6 Cities by rooms in construction in 2017 The 2018-2019 hotel pipeline Note: Activity Ratio %: Ongoing Rooms / Existing Rooms momentum continues to shift since Source: Deloitte, UNWTO European@ 2017 Deloite FinancialCities Advisory are & Hospitality back on track. Note: International expenditure latest available data 2016. 10 Spain: An obsolete Hotel inventory >65% of Spanish Hotel supply is obsolete and existing supply is experiencing a near-zero growth (+0.1% CAGR 13-17). However, the Balearic Islands have taken The Hotel Property Handbook 3.0 Spain 2018 the lead in the repositioning of the hotel stock.

11 15 EXECUTIVE SUMMARY Yrs. Yrs. 9 9 Yrs. Yrs. 8 Yrs. 10 Yrs. 12 8 2,741 Yrs. Hotels Yrs. 8 Yrs. +3,030 Ongoing rooms 8 1,135 Yrs. +2% Hotels Spanish Hotel Supply +5,131 Ongoing rooms Average Age (Yrs.) +9% 6 1,112 9 stands at Yrs. Yrs. 12 Hotels 10 1,286 Yrs. +930 9.3 years ! Yrs. Ong. rooms Hotels +1% +7,360 Ongoing rooms What about Spain? +4% 9 According to industry standards Hotel 9 Yrs. lifespan is between 10-15 years… 2,725 Yrs. Hotels

+6,532 Ongoing rooms +5% Refurbishment and 537 9 Hotels Yrs. Repositioning are 2018 top +5,328 Ongoing rooms Hotel Rooms Avg. age since last refurbishment priorities in order to achieve +5% % % Activity Ratio: Ongoing Rooms / Existing Rooms full potential value Note: Data by Region @ 2017 Deloite Financial Advisory & Hospitality Source: Deloitte, INE, Alimarket 11 Smart CapEx: the success factor for equity and lending players The Hotel Property Handbook 3.0 The total CapEx investment for Spanish Hotel Properties overthe next five years amounts to €2,200m. Spain 2018 2018-2022 Estimated CapEx allocation per region EXECUTIVE SUMMARY

Madrid MAJOR OPPORTUNITIES! 8% Andalusia 4*HOTELS Canary Islands, 22% Andalusia and Balearic Islands require 68% of the total CapEx investment for the 2018-2022 period. Canary I. 26% Smart CapEx (€k/key) breakdown: Total CapEx Region 5*GL 5* 4* €2,200m Catalonia €15.5k - €16.5k €5k - €6k €5k - €6k Andalusia 14 Yrs. 7 Yrs. 10 Yrs. Exc. Hotel Upgrades, New 14% 1,850 Rooms 2,000 Rooms 27,400 Rooms Projects and full repositioning €8k - €10k €5k - €6k €4.5k - €5.5k Catalonia 8 Yrs. 7 Yrs. 9 Yrs. 800 Rooms 2,300 Rooms 25,000 Rooms BEFORE… Barcelona AFTER! Community €9k - €11k €3.5k - €5.5k €5k - €6k 9 Yrs. 9 Yrs. 10 Yrs. Balearic I. 6% of Valencia 150 Rooms 750 Rooms 10,700 Rooms 16% C. Valencia Balearic €3.5k - €5.5k €6.5k - €8.5k €2.5k - €3.5k 8% 5 Yrs. 6 Yrs. 6 Yrs. Islands 330 Rooms 4,000 Rooms 20,900 Rooms Canary €10.5k - €12.5k €9.5k - €10.5k €5k - €6k 10 Yrs. 11 Yrs. 10 Yrs. Islands 1,900 Rooms 7,350 Rooms 31,250 Rooms €18.5k - €20.5k €4k - €6k €4k - €5k Madrid 16 Yrs. 5 Yrs. 8 Yrs. 600 Rooms 1,000 Rooms 10,000 Rooms Princesa Sofía Hotel, Barcelona €k: CapEx Investment per Room Yrs.: Age (years) | Rooms: Estimated Rooms Princesa Sofía Hotel 5* to be renovated Last complete renovation in 2017, @ 2017 Deloite Financial Advisory & Hospitality 12 Source: Deloitte Barcelona, Built in 1973 accounted for €60m, €120k per room. Spain: Understanding 2017 Refurbishments 2015-2017 have been key years for refurbishments. This trend is set to stabilize from 2019 onwards. The Hotel Property Handbook 3.0 Spain 2018 2017 Refurbishments ACTIVE PLAYERS

EXECUTIVE SUMMARY Rebranding Partial 10% 10% 124 hotels -38% 16-17 Total 80% 17,293 Rooms

Hotel Riu Vistamar 4* -475 Rooms Total Refurbishment Top 5 Refurbishment in 2017

Palma 127 Alua Soul Palma Alua Hotels & Resorts 4* Rebranding 1 (Balears, Illes) rooms

Las Palmas 475 Total (Rooms & Hotel Riu Vistamar Riu Hotels & Resorts 4* 2 (Canary, Illes) rooms Common Areas) AluaSoul Alcudia Bay 4*, former Delfín verde- 171 Rooms Rebranding Barcelona 473 Total (Rooms & W Barcelona Marriot International 5* 3 (Barcelona) rooms Common Areas) Refurbishment trend has experienced Sevilla 295 Total (Rooms & Barceló Sevilla Renacimiento Barceló Hotel Group 5* significant turnaround from usual corrective 4 (Andalucía) rooms Common Areas) CapEx to Smart CapEx, which Tenerife Iberostar Hotels & 365 Partial (Rooms anticipates and focuses the investment in the Iberostar Anthelia 5* 5 (Canary, Illes) Resorts rooms Refurbishment) pursuit of satisfying today’s demanding costumers in a strong competitive context. Source: Deloitte, Alimarket @ 2017 Deloite Financial Advisory & Hospitality 13 Spain: Understanding the 2017 New Openings New Openings rebounded, while Refurbishments followed the path set up during the 2015-2016 period The Hotel Property Handbook 3.0 Spain 2018 Last arrivals… 2017 New Openings EXECUTIVE SUMMARY Use-Change 74 hotels New Project 12% +37% 16-17 16% Repositioning 72% 12,535 Rooms

200

19, 000 Nobu Hotel Ibiza Bay 5* -152 Rooms 180 Repositioning

17, 000

160

2017 15, 000 140 74 hotels

c.12,535 13, 000 120 New Openings Trend 2010-2018P 12,535 rooms

11, 000

100 10,586

9, 000

80 Barceló Torre Madrid 5*- 258 Rooms 6,907 Change of Use 7, 000 60 5,396 5,745 5,697 5,120 46 2018

Ongoing 5, 000 40 2017 Hotel Openings and full 3,124 2,825

3, 000 Repositioning consolidated a 20 2018 82 62 68 57 56 34 54 74 24 YTD positive growth, while Hotel - 1, 000 Refurbishments reached cruising 2010 2011 2012 2013 2014 2015 2016 2017 Projected 2018 speed after a strong rebound in New Hotels # rooms Source: Deloitte, Alimarket 2015@ 2017-2016. Deloite Financial Advisory & Hospitality 14 Spain: Understanding of the 2018-2021 Future Supply Why Canary Islands is expected to remain inactive in the long run? The Hotel Property Handbook 3.0 Spain 2018 173 hotels New op. EXECUTIVE SUMMARY 2018-2021 Refurb. New Hotel 47% 53% Openings 30,600 Keys to success: & Refurbishments Rooms

Digital Renovation & Transformation Repositioning

130 hotels 29% Balearic I. 22 hotels 56% Madrid 21 hotels 48%Andalusia 22,373 20% Canary I. 3,328 21% Andalusia 4,894 24% Madrid Hotel Travel 16% Andalusia 17% Balearic I. 15% Canary I. 13% Catalonia 2% C. Valencia 8% Balearic I. Upgrade Experience rooms rooms rooms

Source: Deloitte

2017 Hotel Openings and full YTD2018 2018 2019 2020-21 Repositioning consolidated a positive growth, while Hotel 71% 29% 7% 93% n.a. 100% Refurbishments reached cruising Refurb. New Refurb. New Refurb. New speed after a strong rebound in Source: Deloitte, Alimarket 2015@ 2017-2016. Deloite Financial Advisory & Hospitality 15 So far Equity Investment is here to stay Hotel Properties investment is growing rapidly under a challenging turnaround context The Hotel Property Handbook 3.0 Hotel Properties investment volume increased by 44%, while total Commercial Real Estate Spain 2018 decreased by 13%. Investment in this asset class is expected to keep an upward trend driven by RevPAR and NOP further growth. EXECUTIVE SUMMARY

Top 10CORE Spanish PROFILE transactions: DOMINATES: Top 10 Spanish Hotel transactions accounted for Retail High Street 12.398 Total (€m) 11.845 87% of total hotel investment volume. 660 12.000 Retail Shopping Centre Asset Price (€m) Rooms Retail High Street 1.263 10.834 Halley Portfolio 631 3,709 RetailOffices Shopping Centre 651 10.000 3.769 Edificio España 272 589 Offices 1.894 Starmel Hotels JV (4 Hotels) 230 2,068 Logistics 8.587 Logistic 3.168 Bay hotels (24%) 7,570 172 8.000 Hotels Hotel Villaitana 114 455 Hotels 2.242 Rest of Lopesan (3 Hotels) 104 856 CRE Intertur Hotels (5 Hotels) 100 1,126 6.000 5.313 2.295 4.895 71% Sol Príncipe 89 799 2.297 4.470 Hotel Silken 80 240 4.000 1.630 Hilton Diagonal Mar Bcn (55%) 80 461 1.467 3.189 3.151 Top 10 Total 2,637 20,552 674 591 751 2.520 Source: Deloitte 644 2.087 930 687 Hotel 2.000 571 867 Typology 1.460 A total pipeline investment volume of 1.056 365 2.702 3.090 €4,200m 807 596 2.145 150 544 29% is expected to be traded in Spain 279 88 120 750 576 519 607 932 - 2010 2011 2012 2013 2014 2015 2016 2017 1,200 2,500 4,200 +44% 500 Source: Deloitte Short@ 2017 Term DeloiteMediumFinancial TermAdvisory &Long Hospitality Term TOTAL 16 Lenders are underpinning investment But… is the crisis lesson learned?

The Hotel Property Handbook 3.0 Spain 2018 2013-14 2015 2016 2017 2018YTD

Framework Credit Access Financing EXECUTIVE SUMMARY Constraints Upturn

Institutional Main Players Investors / Debt Banking / Insurance Alternative MAIN DRIVERS FOR THE INCREASING Companies + lenders LENDING DEMAND Funds

MACROECONOMIC ENVIRONMENT Upfront Fee 150-250bps 125-175bps 100-150bps 90-150bps 75-150bps . Improvement of fundamentals . Monetary Policy: QE, low funding costs, etc. Spread 225-400bps 200-250bps 175-225bps 150-225bps 135-225bps FINANCIAL SECTOR . Restructuring of the Financial Sector . P&L reconstruction

LTV (1) 45-50% 45-55% 50-60% 50-65% 50-60% REAL ESTATE INVESTMENT MARKET

. Excess of Liquidity: Increase in transactions Main Conditions . Entry of new sponsors Balloon (2) 60-80% 65-100% 70-100% 70-100% 70-100% . Alternative to the fixed income / bond yields

Source: Deloitte (1) Sustainable LTV to face the debt service with high funding costs (A bigger LTV will mean a bigger debt service) (2) Balloon needs to cover the high funding costs during the loan´s life. (a smaller balloon will mean a bigger annual debt service). Estimated balloon for a 5-7 years loan. . Development loans: Traditional lenders are coming back Location, category, performance, type of operating contract (including mandatory period duration) Senior Debt: and hotel brand have a significant impact on financing terms. . Yielding assets: Source: Deloitte gathering@ 2017 Deloite Financial momentum Advisory & Hospitality 17 A more defensive tax environment BEPS are making an impact on tax structuring strategies

The Hotel Property Handbook 3.0 Spain 2018 Substance concentration EXECUTIVE SUMMARY Simplification of holding structures as a way to concentrate

substance. Creation of investment platforms with qualified personnel and

Drivers of the increase in cross-border substance. investment:

Yielding Real Estate is still more Business rationale attractive than Investment Grade 1 Bonds Ongoing monitoring and support of tax benefits being Yield compressions in most proportionate to business reasons deriving from the structure. of the countries led to a significant growth of capital 2 values

Accessibility to credit and Funding structure more attractive financing 3 conditions More conservative funding structures with SHLs duly supported by complete TP documentation. Political and financial uncertainly in certain regions of Europe, but markets still 4 responding well. Source: Deloitte Withholding taxes Reinforced substance at platforms as to Tax advisory is still facilitate dividend WHT. Back-to-back borrowing to be key to a successful exit. avoided.

Source: Deloitte @ 2017 Deloite Financial Advisory & Hospitality 18 Who is Who: The main Players A new competitive map for a wide variety of value creation strategies

The Hotel Property Handbook 3.0 Spain 2018 Equity OUT Equity IN Main Chains

EXECUTIVE SUMMARY

CORE PROFILE DOMINATES: 2016 2017

Value Opportunistic Added 10% 7% Core+ Value 11% Added 20% Core 59% Core Debt Providers Core+ 79% 14%

(€m) (€m) Core 1,820 Core 1,702 Core+ 456 Core+ 234 Value Added 605 Value Added 209 Opportunistic 209 Source: Deloitte

NPL – DPO Specialists Most active players expected to stay active in 2018:

Source: Deloitte @ 2017 Deloite Financial Advisory & Hospitality 19 The Hotel Property Handbook 3.0 Spain 2018 For further information… Request the Expanded Edition Contents (225 pages): 1. Macro economic overview related to the Tourism Industry and Hospitality Activity. 2. European Hotel Properties market understanding and key data. 3. Spanish Hotel Properties market understanding and key Supply & Demand data, main openings and refurbishments, future openings pipeline 2018-2021. 4. Hotspot In Depth Analysis (i) Vacational Hotspots (analysis by coast): Andalusia, Catalonia, Community of Valencia, Balearic Islands, Canary Islands. (ii)Urban Hotspots (analysis by city): Malaga, Sevilla, Barcelona, Valencia and Madrid. 5. Key to Success and Upcoming Challenges (Uncertainties and Opportunities) 6. Hotel Properties investment share and transactions pipeline in Spain. 7. Hotel Properties financing market main drivers. 8. Detail of most active players and key financial terms offered. 9. Hotel Properties key investment factors.

To request the expanded edition, please contact Esther Sanchez, email: [email protected], telephone number: +34 911578354 @ 2017 Deloite Financial Advisory & Hospitality 20 Javier Garcia-Mateo, MRICS Jose Maria Espejo Partner – Project Leader Senior Manager Financial Advisory ‖ Hospitality Financial Advisory ‖ Hospitality [email protected] [email protected] Cristina Cabrerizo Felix Villaverde Partner Manager Financial Advisory ‖ Hospitality Financial Advisory ‖ Hospitality [email protected] [email protected] Rafael Arcas Viviana Otero Partner Assistant Manager Financial Advisory ‖ Hospitality Financial Advisory ‖ Hospitality [email protected] [email protected] Fernando Baldellou Xandra Lopez Managing Partner Assistant Manager Financial Advisory ‖ Hospitality Financial Advisory ‖ Hospitality [email protected] [email protected] Jordi Schoenenberger Patricia Plana Managing Partner Associate EMEA Hospitality Industry Leader Financial Advisory ‖ Hospitality [email protected] [email protected] Gerardo Yagüe Amadeo Gimenez Partner Associate Financial Advisory Financial Advisory ‖ Hospitality The Hotel Property [email protected] [email protected] Maria Lucia Javier Arribas Analyst Handbook 3.0 Director Financial Advisory ‖ Hospitality Financial Advisory [email protected] [email protected] Spain 2018 Claudia Muñiz #TheHotelPropertyHandbook Analyst Financial Advisory ‖ Hospitality www.deloitte.com/es/financial-advisory/the-hotel-property-handbook [email protected]

Other acknowledgements: Ignacio Allende, Africa Palau and Marc Molas (Financial Advisory Directors); Christopher Martinez (Financial Advisory Senior Manager); Nabil Lamarty (Financial Advisory Manager); Isabel Labat (Consultancy Manager); Monica Martin (Financial Advisory Associate). @ 2017 Deloite Financial Advisory & Hospitality 21 @ 2017 Deloite Financial Advisory & Hospitality 22