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Mercan Properties reinforces investment in Portugal with portfolio expansion to the south
Image: Gerardo Santos / Global Imagens
The Algarve is the company's second big bet with six hotels budgeted at 384 million euros. North Americans are already the main investors, followed by investors from India.
Mercan Properties' passion for Portugal began in the north when, in 2015, it decided to take its first steps in the country. The company, which is part of the Canadian Mercan Group, already has ten projects in the cities of Porto, Vila Nova de Gaia, Matosinhos and Amarante - five of which are already open, the first in 2021 - and wants to broaden its horizons and firm its commitment to the south and islands.
The growth plans are ambitious. By the end of next year, it estimates to reinforce investment in Portugal, reaching the threshold of 1.4 billion euros, exceeding the initial budget foreseen for the next 12 months and creating three thousand direct jobs. "Currently, we have a total of 23 hotel projects in the country with an estimated investment of 890 million euros. This plan is expected to be implemented by 2025, but we are reinforcing the objectives we had set out last year, which provided that by the end of 2023 this portfolio could grow to one billion euros of investment. As a result of the good performance we have had, we are going to try to grow to 1.4 billion euros", reveals Miguel Gomes, Construction & Development General Manager of Mercan Properties.
The person in charge adds that the budget review will allow the entry of ten more projects during 2023. With the strategy in the north in tune, the Algarve is the second big bet of the company, with a slice of 43% of the current budget destined for the region. There are 384 million euros for six hotel assets: two in Lagos, which will operate under the Hilton brand, two in Portimão and one in Faro. The construction of the hotels starts in the next two years and openings are scheduled for 2025 and 2026. Only the Faro unit will result from the rehabilitation of an existing asset, with the remaining five built from scratch.
"In the Algarve, the projects will be larger than those we have in urban centres, such as Porto or Lisbon. The type of tourism and the target audience are different. We have hotels that reach 400 accommodation units", says Miguel Gomes.
Also in early 2023, the construction of the first three hotels in the capital will start – which will result from rehabilitation projects – in an investment that amounts to 133 million euros. The Alfragide business center will give rise to the most expensive investment in Lisbon, the Moxy Alfragide Lisbon, which will cost 63 million euros and will have an offer of 218 rooms. In Loures, close to the airport, a four star hotel with 230 rooms will be built, budgeted at 73.5 million euros. The debut triad in the Portuguese capital is completed with the investment of 31.5 million euros in the city's historic area, with 80 accommodation units, between Bairro Alto and Chiado.
The Alentejo is not left out of plans and, in addition to the 57 million euro investment to the two hotels already announced - Hilton Garden Inn Évora, which opens in the first quarter of 2023, and Holiday Inn Express Évora Hotel which opens in 2024 - Mercan Properties will pay 37.8 million euros for two more projects in the region, one of them being a small hotel in the parish of Santo André, in Santiago do Cacém.
The company, which develops real estate projects in the tourism sector, has never hidden its desire to expand operations to the islands. The relationship with Madeira has already begun and, despite not having resulted in marriage, the Canadians hope to have a date set for the wedding soon. "This was the year when we did the first market prospections, mainly in Madeira, and invested some time in the search for properties. We have identified potential investments but for various reasons, so far, none have materialized. We are still looking very convinced and willing to invest in the islands – first in Madeira and then in the Azores”, assures the Manager. The person in charge says that, in addition to the islands, the Douro is also on the investment radar.
North Americans are the ones who invest the most.
More than two dozen real estate projects in the tourism sector, representing 2614 rooms, are fully financed through the golden visa program. After all, Mercan Properties attracted 2500 foreign investors to the country; and if initially the Chinese were the main interested parties, currently the North American market is the one that has grown the most in the company's portfolio, already being the main investor, followed by the markets of India, China, Vietnam, South Africa and Russia. The list of countries seduced by Portugal also includes Bangladesh, Iran, Pakistan and Mexico.
The engineer admits that it could be beneficial for the program to be revisited "but always with the aim of improving it" and not putting an end to it, considering "the benefits it generates for the economy, for tourism and for employment". “Rarely is there talk of the benefits that this program has brought over the ten years it has been in force, as exemplified by the total investment of seven billion euros since 2012, 90% in real estate [according to SEF data], and the jobs created. We are a good example of how golden visas directly contribute to the economy by creating jobs”, he points out.
The spokesperson also admits that, in the future, the company's objective is to diversify the business model both in the investment area and in financing models. “The world changes and circumstances change and we will adjust to them. Our objective in the medium term is to diversify the type of properties we build, not just investing in hotels and entering other areas, such as residential and offices”, he guarantees. Regarding the financing model, he says that the company will not “stay forever” operating with gold visas and the objective is to diversify the forms of investment through equity, banking and other investor profiles.