News that hedge-fund magnate John Paulson is in talks to buy the Condado duo took the International Hospitality Enterprises, the hotels’ developer and operator, completely by surprise but “It’s an offer to (IHE’s) best advantage,” said a source.
That’s because IHE is likely to stay as the operator since Paulson has indicated that he has no interest in managing the hotels,” said the source, adding that IHE founder and CEO Hugh Andrew’s successful track record is a major draw.
“Part of the attraction of the purchase is Hugh Andrews and his team,” the source said.
Paulson, president of New York-based investment firm Paulson & Co., is reportedly in negotiations with the Government Development Bank, owner of a major stake in the tourism complex, which consists of La Concha and the Vanderbilt hotels. Separated by a park, both properties have a commanding presence in the heart of the Condado tourist zone, hence the name Condado duo.
Asked to address the negotiations, GDB Spokesperson Betsy Nazario said the agency will not comment for the time being.
According to a Bloomberg report, Paulson & Co is offering $200 million for the complex.
“It is less than that,” said the source, adding that the buyer will need to invest around $50 million to complete the renovation of the Vanderbilt Hotel, which opened in 2012 after being shuttered for 16 years but has been operating half way: the meeting rooms and food and beverage establishments are open for business but its guests rooms are not.
If the investment goes through, it would boost Paulson’s already considerable presence in Puerto Rico: he owns a stake in Banco Popular, Puerto Rico’s largest bank, and last year acquired a majority stake in the St. Regis Bahia Beach Resort and the Bahía Beach Resort & Golf Club.
Like other outside investors, Paulson has been drawn to the island by a couple of laws passed during the former Fortuño administration that provide attractive tax exemptions that are beginning to pay off.
Paulson has said he plans to invest $1 billion in Puerto Rico over the next two years, according to government officials.
Last October, NIMB reported that Caribbean Property Group was negotiating to buy the Condado Duo. But the negotiations fell through.
The source explained that Paulson & Co. stepped in when CPG failed to get an extension on its offer to buy the complex.
He said CPG, which put down a $1.5 million deposit in August 2013 on the properties, was unable to meet a deadline for a second $1.5 million deposit necessary to get an extension on the purchase.
That’s when Paulson came into the picture.
The source said that IHE is not a party in the negotiations, which are being handled by GDB. Another institution with a stake in the property is Scotiabank.
However, the source mentioned that Paulson made a surprise visit to the Condado duo a week or so ago where he met with Andrews.
He described the billionaire as a “low key, quiet, accessible man.” Surprisingly, for a person with a net worth of $11 billion, he came without an entourage and even stopped to talk to staffers, including the bellboys.