Fibra Inn Buys Secrets Silversands Riviera Cancun

Fibra Inn, a Mexican real estate investment trust internally managed specializing in the hotel industry serving the traveler with global brands, announced today that it is entering the beach hotel segment with the signing a purchase option for a property in Riviera Maya.

Given Mexico’s current favorable macroeconomic and hotel industry environment, Fibra Inn has decided to venture into the beach hotel, or resorts, because business hotel seasonality is offset by beach hotel cyclicality, which benefits Fibra Inn as it increases income stability throughout the year.

The company also mentioned that rates for destination luxury beach hotels are generally dollar-denominated, which strengthens the Company's revenue mix, and that occupancy levels are expected to grow due to a greater influx of international guests to key Mexican beaches within a globally price competitive environment.

Fibra Inn will capitalize on the expertise of resort hotel operators in global chains that already manage these types of specialized properties, both in all-inclusive and European formats.

In the same breath, beach hotels tend to be highly profitable due to their competitiveness in the international markets; additionally, recent transactions in the luxury and beach segments have better valuation with cap rates below 8.5 percent.

For these reasons, Fibra Inn has signed an exclusive purchase option to acquire the Secrets Silversands Riviera Cancun resort under the Hotel Factory structure exercisable in the next 45 days.

This luxury property operates under the all-inclusive business model exclusively for adults in Riviera Maya. It currently has 441 rooms in operation and 175 rooms will be added, which will be operating in approximately 24 months and are expected to stabilize after a year.

This 175-room expansion will be comprised of 150 new rooms plus 25 double suites that will be divided into 50 single rooms.

The rooms are an average of 65 square meters in size, and are particularly spacious and well-lit, which is the marked difference between this hotel and competing hotels, and is an attractive sales benefit when marketing the property. 

Fibra Inn will keep the current brand, Secrets Silversands Riviera Cancun, and the hotel will continue to be managed by AMResorts.

The total investment will be US$160 million plus an estimated US$ 20 million that will be used for the room expansion and various investments in the property.

Fibra Inn seeks to participate with 33 percent of the total investment and the remaining stake will be submitted for consideration to two Mexican institutional funds that are interested in the project, in theory, and whose terms are defined under the Hotel Factory format. The purchase option will be exercised, where appropriate, once the funds are confirmed.

The purchase price represents a NOI cap rate of 10 percent for the last 12 months; and a cap rate of at least 12.5 percent is expected once operations stabilize in 3 years including the room expansion.

Fibra Inn will allocate US $53 million on the date of the transaction and an additional US $6.7 million for the expansion, in line with construction progress. 50 percent of the total amount will come from the subscription of CBFIs announced on July 4, 2018 and the remaining 50 percent will be bank debt at the project level.

Fibra Inn will charge fees under the Hotel Factory format for the structuring of the transaction, the development of the room expansion and asset management. These fees will be set once the purchase option is exercised.

The hotel currently has an occupancy rate of over 80 percent and a total income per guest of over US$ 170 per night, which includes the room rate, plus food and beverage, and SPA services.

AMResorts is part of the Apple Leisure Group (ALG). It is a renowned leader in the management of luxury All Inclusive hotel brands with solid global sales, marketing and distribution structure.

It has over 20,000 rooms operating in Mexico, the Caribbean and Central America under its seven brands. ALG is the leading US Group in the leisure travel segment with a vertically integrated business model that serves travelers and destinations around the world.

Secrets Resorts & Spas is an AMResorts brand exclusively for adults. All of its hotels are located in the best beaches offering a romantic and sensual stay. The hotels operate under the Unlimited-Luxury model, where all is inclusive.

The rooms and suites offer a tasteful and cozy ambiance, concierge and 24-hour room service, as well as gourmet dinners and lounges offering premium beverages. Guests enjoy an agenda including a widespread of day and night activities that, together, provide all the necessary elements to enjoy a romantic vacation as a couple.