Lone Star Seeks $1.1 Billion to Enlarge Portuguese Golf Resort

Lone Star Funds is seeking partners to invest 1 billion euros ($1.1 billion) in Vilamoura, a residential golf resort in Portugal’s Algarve region that’s more than eight times the size of Monaco.

The U.S. private-equity firm is teaming up with Vilamoura World to double the number of homes at the resort to about 10,000 within five years, according to Paul Taylor, chief executive officer of the Portuguese developer. They also plan to build as many as five hotels with about 4,000 rooms on the site, which already has five 18-hole golf courses and an 825-berth marina.

International home buyers are targeting Portugal after the government introduced measures which allow non-Europeans to live in Portugal in exchange for property investment of at least 500,000 euros. The program has raised 1.47 billion euros of investment since it began in 2012, according to APEMIP, Portugal’s Real Estate Professionals and Brokers Association.

“Due to the golden visa scheme, we are seeing a lot of interest from China, Brazil and even India,” Taylor said. He said a reduction in expatriate income tax to 20 percent from 48 percent is also attracting investors.

Economic Revival

Portugal’s economic revival, following a three-year bailout program that ended in May 2014, is also fueling demand for hotels and other commercial properties. Investment in Portuguese real estate totaled 972 million euros in the first half, according to data from CBRE Group Inc. That exceeded the 847 million euros that was invested in the whole of last year.

Lone Star bought Vilamoura from struggling Spanish savings bank Catalunya Banc and Algarvetur in March for an undisclosed amount. The resort, about a 20-minute drive from the international airport in the city of Faro, spans about 17 million square meters (183 million square feet). No one at Lone Star was available to comment.

“There is a real investor fever for residential golf resorts in southern Europe right now,” said Patricio Palomar, head of alternative investments at brokerage CBRE Group Inc. in Spain. “Investors have seen the risk profile of countries such as Portugal diminish as its economy improved and prices bottomed, its a good time to invest.”

The economic recovery in northern Europe, the traditional source of holiday makers to Portugal, will also boost demand for hotel rooms and holiday homes, Vilamoura World’s Taylor said. In 2014, Portugal attracted 16 million tourists, up 14 percent on the previous year, according to Portugal’s official tourism institute. Visitors to the Algarve totaled 3.6 million spending a total of 695 million euros, according to the organization.

Source: Bloomberg