Information on the Target

RIC Private Equity, a Canary Islands-based private equity firm recently registered with the National Securities Market Commission, has initiated a capital increase authorized by the Canary Islands Government on April 16. This funding will support the transformation of the former Maya building in Santa Cruz de Tenerife into the new four-star AC Hotel Tenerife, set to open in October. The firm plans to invest €2 million in Hotel Project Tenerife, the company overseeing the hotel’s development. This investment is anticipated to commence imminently, supported by existing commitments from RIC Private Equity, which will subsequently increase its share capital to €3.2 million and encompass 32 shareholders.

In addition, RIC Private Equity aims to expand its shareholder base to 400 and reach a social capital of €40 million this year through renovation projects at three other four-star hotels located in Costa Adeje (Tenerife), Puerto Rico (Gran Canaria), and Playa Blanca (Lanzarote). The company is associated with several leading businesses in the tourism sector, enhancing its credibility and prospective impact on local tourism.

Industry Overview in the Target’s Specific Country

The Canary Islands' tourism sector is a vital component of the local economy, significantly affected by the adverse economic impacts of the COVID-19 pandemic. The repercussions of the crisis are expected to be prolonging, hampering tourism activities and thereby affecting the economic capacity of local residents across various sectors. Given that tourism plays a critical role in the economy, recovery initiatives are essential to mitigate these effects.

Major economic institutions have recognized the severe consequences of the pandemic on national and international tourism. In the Canary Islands, the reliance on tourism has rendered the region particularly vulnerable, as restrictions have limited travel and operations, leading to considerable losses in revenue.

The Spar Gran Canaria Group, a significant stakeholder in RIC Private Equity, emphasizes that in the wake of such extraordinary and unforeseen events, there is a greater need than ever for the investment mechanisms provided by the Reserve for Investments in the Canary Islands (RIC). They advocate for initiatives like RIC Private Equity that can channel vital funds into the tourism sector, which is desperately seeking to maintain competitiveness through essential upgrades and resilience measures.

Consequently, the Canarian economy's recovery heavily depends on rejuvenating the tourism sector. Innovations and renovations in existing hospitality facilities are pivotal as they align with evolving market demands and expectations, vital for restoring the region's attractiveness to travelers.

The Rationale Behind the Deal

The investment in the AC Hotel Tenerife signifies a strategic move by RIC Private Equity to capitalize on the anticipated resurgence of tourism in the Canary Islands. By facilitating the conversion of the Maya building into a modern hotel, RIC is investing not only in a real estate asset but also in the future of tourism in the region. This aligns with the pressing need to revitalize tourism-related infrastructure post-pandemic.

Moreover, the hotel is expected to enhance the local economy by creating jobs and providing services that meet the demands of both tourists and residents. With the planned introduction of the AC by Marriott brand, this project aims to elevate the hospitality offering in Santa Cruz de Tenerife and solidify the region's reputation as a desirable travel destination.

Information about the Investor

RIC Private Equity was established with the goal of developing a diversified investment portfolio, consisting of 60% equity investments and 40% participative loans in top-tier tourism companies. Its purpose is to support these firms through their extensive hotel projects in the Canary Islands over a five to six-year horizon, linking its investments to strategically important properties.

The firm comprises prominent Canarian entrepreneurs actively engaged in the tourism industry, providing RIC with valuable insights and connections that facilitate successful business operations. Their collective experience and commitment to the region's tourism sector are essential for ensuring the ongoing success of the investment initiatives.

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This investment in the AC Hotel Tenerife stands out as a promising opportunity within the currently challenging tourism landscape. By supporting the transformation of an underutilized property into a sophisticated hotel, RIC Private Equity is positioning itself to reap substantial returns as the market rebounds. This project demonstrates insight into the ongoing evolution of the tourism sector, which is poised for recovery and growth in the coming years.

Furthermore, aligning with an established brand such as Marriott enhances the potential for success by attracting a broader clientele and assuring quality service. This strategic partnership increases the likelihood of a swift return on investment, whereas the focus on refurbishing existing structures reflects a sustainable approach toward local tourism development.

However, it is imperative to acknowledge the lurking uncertainties in the tourism sector due to ever-changing global conditions. While this investment appears robust, ongoing analysis and responsive strategies will be crucial to navigate potential risks, particularly as we continue to feel the aftereffects of the pandemic.

In summary, the project not only represents a financial investment but also a commitment to revitalizing the local economy, thus providing a dual benefit of capital appreciation and socioeconomic uplift. This dual focus augurs well for both RIC Private Equity and the broader community in the Canary Islands.

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