As the shackles of the global financial crisis seem at last to be breaking, Americans have returned in force to Portugal.
Last week came the news that Vilamoura’s flagship resort had been sold to US equity fund Lone Star for €200 million, and now comes the announcement that America’s Armory Merchant Holdings have their sights firmly set on the former Espírito Santo country estate Herdade da Comporta, in the heart of the Alentejo.
Ready to shell out €400 million on the deal, the company with “a focus on long-based, deep value and income producing investments” has already taken over the €100 million debt that the Espírito Santo family had on the 12.500-hectare property, and so become the largest majority shareholder.
According to Jornal de Negocios, the fund led by financier and art collector Asher Edelman and legendary operator in the field of “distressed investments”, David Storper, wants to pay for Comporta in “four slices” – with only €100 million euros earmarked for investment in the “immediate relaunching of the development”.
The rest of the money goes to pay off Herdade da Comporta’s debts.
With one hundred million already dealt with, there is still another €200 million in the so-called “Fundo de Investimento” to clear.
Observador website quotes Edelman as saying of his new acquisition: “Comporta is the best resort in the world. Why isn’t it a resort?”
But it is still far from clear what the Americans plan to do with their purchase.
A source with knowledge of equity fund dealings said they are almost certain to “tidy it up and sell it on asap. Those that concentrate on really badly distressed assets, like this one, are called ‘vulture funds’ – because they operate in the murky end of the market buying debt often from banks, and one is never sure if the bankers are compensated in ‘other ways’ for selling off businesses that they themselves often have forced onto illiquidity,” he told us.
JN presents the deal in a different light, quoting Michael de Mello – a friend of both Asher Edelman and related to the Espírito Santo family – as saying that Armory Merchant are “people with enormous negotiating and investment capacity”.
Whatever the case, the deal – expected to be completed by May if not before – represents the second major North American “investment” in Portugal this year, with Lone Star’s takeover of Vilamoura for a fraction of what the complex was worth pre-economic crisis being the first.
What are equity funds?
This is where term “investment in Portugal” becomes a little murky. Are these American companies truly “investing” or are they simply buying-up distressed assets to off-load them as fast as possible?
Wikipedia writes that private equity funds are dubbed “vulture funds” when they invest in debt considered to be “very weak or in imminent default” – which Herdade da Comporta certainly was (its €100 million debt to Caixa Geral de Depósitos was overdue).
Wikipedia continues: “Investors in the fund profit by buying debt at a discounted price on a secondary market and then suing the debtor for a larger amount than the purchasing price.
“Debtors can include companies, countries, or individuals”.
Thus it is not at all clear what will happen to Comporta, which nonetheless is an extraordinary chunk of real estate, midway between Alcácer do Sal and Grândola and not much more than an hour’s drive from Lisbon.
With its own vineyards, and plans for golf courses and holiday villages beside the sea, it is described in a publicity video on Youtube as the “land of blue, green and all the shades in between”.
It just remains to be seen what colours those shades are.
By NATASHA DONN [email protected]
