FBD Hotels, the wholly-owned subsidiary of the investment vehicle Farmer Business Developments, has announced plans for a further €100m development of its 1,000 acre La Cala resort in Spain. The development, which will be carried out as part of a joint venture with British construction firm Taylor Wimpey, will see the construction of 280 units at the La Cala site.

This is the fourth joint venture development between FBD Hotels and Taylor Wimpey since 2014. However, this latest deal between the two companies differs slightly from previous agreements in that only 190 of the 280 units will be owned 50:50 between Taylor Wimpey and FBD Hotels. The remaining 90 units will be entirely owned by FBD Hotels.

Speaking to the Irish Farmers Journal this week, FBD Hotels chief executive David Kelly said this latest joint venture would bring gross sales from its four development phases with Taylor Wimpey to more than €200m when realised.

“In total we have now agreed joint venture developments for 658 units on the La Cala site since 2014. These developments account for 36% of the development land FBD Hotels owns in La Cala” said Kelly.

“Gross sales should come to more than €200m and our cut from that will be €42m or €43m. In total, 114 units have been sold to date which has brought in about €10m to FBD Hotels. So we’ve realised about 25% of the sales value of our share of these units already. We will get the balance of that return over the next five to seven years,” he said.

Development

Although these four development phases have used more than a third of the development land available at La Cala, a further 250 acres of bare land remains available for development down the road.

Close to 60% of all the units sold to date are bought by either UK or Belgian customers according to Kelly. While unit prices have increased between 10% and 15% over recent years, Kelly says the depreciation in the value of sterling since the Brexit vote has not affected demand from UK buyers as yet.

What is noticeable according to Kelly, is the change in booking patterns since the fall in sterling with UK tourists leaving it later in the year to book holidays. Aside from this, Kelly says the overall tourist market in Spain is very strong, with 75m visitors arriving in 2016. Tourist numbers to Spain are forecast at 82m next year.

“Spain is the third biggest country for tourism numbers,” says Kelly. “Displacement is definitely helping, with more people choosing Spain as a safe holiday destination following terrorist attacks in places like France, Germany, Tunisia and the UK.”

FBD Hotels reported an 8% increase in earnings (EBITDA) for its 2016 financial year to €9.9m.

Turnover for the year amounted to €47.5m. Since Farmer Business Developments assumed full control of FBD Hotels in November 2015, the priority for Kelly has been to reduce the €46m debt on the company’s balance sheet.

At year-end 2016, net debt was reduced to €38m which leaves the balance sheet in very good shape according to Kelly. “The net debt still remains a priority for me. But the strong performance is enabling us to loosen up a bit,” he says.

“Last year we redistributed €1.2m to Farmer Business Developments, which is two years ahead of schedule. My aim is for this business to start making annual and consistent repayments to Farmers Developments.”

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