Institutionals Transformation of existing properties: Developing values sustainably
15.05.2024 • 7 Reading Time
Zleep Hotel Madrid Airport
In 2019, Commerz Real was the first investment for the Commerz Real European Hotel Fund in the immediate vicinity of Madrid Barajas Airport to acquire an empty office building with around 10,000 square metres of rental space. Just over two years later, a two-star hotel of the Zleep Hotels brand was opened in this building. The house, which has 280 rooms, 220 underground car park spaces, a restaurant, lobby, fitness area and a hotel-owned shuttle service to the airport, is managed under the umbrella brand H World International, which also includes Steigenberger and InterCity Hotels.
And with growing success, as the Zleep Hotel is not only popular with airline passengers and business people for its comfort and proximity to Madrid Airport and the IFEMA Convention Centre. It is also increasingly being booked by city travellers because you can get to the city centre of the popular Spanish metropolis quickly and conveniently from here - whether by car or by public transport. In other words, a renovation project that can rightly be described as a pioneering example of the successful transformation of existing properties in general and the hotel asset class in particular.
And with growing success, as the Zleep Hotel is not only popular with airline passengers and business people for its comfort and proximity to Madrid Airport and the IFEMA Convention Centre. It is also increasingly being booked by city travellers because you can get to the city centre of the popular Spanish metropolis quickly and conveniently from here - whether by car or by public transport. In other words, a renovation project that can rightly be described as a pioneering example of the successful transformation of existing properties in general and the hotel asset class in particular.
Conversion in existing: the future of construction
Maintaining and adapting existing buildings instead of demolishing and building new ones is becoming increasingly important in the real estate industry - both in the context of ecological and economic objectives. This is because the transformation of an existing property not only preserves and develops tangible but also intangible assets.
Redesigning existing properties offers an opportunity to adapt historically grown buildings and neighbourhoods to changing needs. Energy refurbishment is of great importance here, as modernisation enables us to reduce energy consumption, reduce CO₂ emissions and thus contribute to climate change mitigation.
Challenges and success factors
Mario Schüttauf, Managing Director, Commerz Real Investmentgesellschaft mbH, defines the success factor in the area of conversion in existing buildings as the ability to:
“To develop a holistic and long-term approach that meets people’s current needs and is in line with ecological and cultural aspects while being economical.”
Against this backdrop, the conditions for the conversion project in Madrid were favourable: The good price at the time of the building purchase and the existing technical and infrastructural equipment provided an excellent basis for planning the conversion and for its successful implementation.
However, it was challenging to manage such a project remotely. After all, Commerz Real with its main locations in Wiesbaden and Düsseldorf separates Madrid by almost 1,500 kilometres by air. This was also an exciting task for H World International, for whom the project meant entering the Spanish market. Thanks to our partnership relationship with project partners, the general contractor we commissioned agreed to send an employee to Spain for the construction phase who knew how to deal with the expected compromises and uncertainties, as he was familiar with both Spanish and German administrative practices.
However, one challenge that even the most experienced professional could not have expected was the outbreak of the coronavirus pandemic. It hit Spain hard, and during the strict lockdown the whole country stood virtually still. Approvals that were urgently required for the conversion to proceed were missing. The competent authorities were unavailable for a long time.
After the tireless efforts of the project team and all partners involved on site, the conversion project was successfully completed despite all the adversity. In 2022 December it was time: The Zleep Hotel Madrid Airport opened its doors - without exceeding the planned construction costs.
However, it was challenging to manage such a project remotely. After all, Commerz Real with its main locations in Wiesbaden and Düsseldorf separates Madrid by almost 1,500 kilometres by air. This was also an exciting task for H World International, for whom the project meant entering the Spanish market. Thanks to our partnership relationship with project partners, the general contractor we commissioned agreed to send an employee to Spain for the construction phase who knew how to deal with the expected compromises and uncertainties, as he was familiar with both Spanish and German administrative practices.
However, one challenge that even the most experienced professional could not have expected was the outbreak of the coronavirus pandemic. It hit Spain hard, and during the strict lockdown the whole country stood virtually still. Approvals that were urgently required for the conversion to proceed were missing. The competent authorities were unavailable for a long time.
After the tireless efforts of the project team and all partners involved on site, the conversion project was successfully completed despite all the adversity. In 2022 December it was time: The Zleep Hotel Madrid Airport opened its doors - without exceeding the planned construction costs.
Transformational investing: Moving markets sustainably
Reconstruction of existing buildings, revitalisation and energetic refurbishment offer opportunities to positively transform markets with the collective power of institutionals: Transformational investing, as we call it.
The asset class in particular has great potential, as Dirk Schuldes, Head of Real Estate Hospitality and Shopping, confirms:
The asset class in particular has great potential, as Dirk Schuldes, Head of Real Estate Hospitality and Shopping, confirms:
The hotel asset class is once again clearly in the focus of investors. We are now seeing numbers of overnight stays in many places at the record level of before the coronavirus crisis. Some of these values are even exceeded. However, instead of new construction activities, value-added investments are increasingly in the foreground, for example existing conversions with short-term growth opportunities. For example, our property at Madrid Airport, which we have transformed from an office vacancy into a hotel asset. Here, we deliberately planned ahead during the renovation, so that the hotel can be redesigned relatively easily in the event of long-term needs.
With our large network of experienced experts and external experts, as well as our long-standing business relationships within the industry, we are the perfect partner for transformational investing. Because thanks to our bundled know-how, we can identify the really good deals at an early stage and buy the right property at the best time at a reasonable price to successfully transform it.