UPDATE, August 20, 2020, 9:30 a.m .: A Miami-based private equity firm plans to launch a $ 500 million fund to invest in distressed, value-added hotels in North America and the Caribbean that would carry the Hilton brand, The real deal has learned.
CGI Merchant Group will acquire some 20 properties over the next few years, said Raoul Thomas, founder and CEO of CGI. The company intends to take advantage of the purchasing opportunities created by the pandemic.
“We are very, very optimistic about the long term vision for the hospitality industry,” said Thomas. “We believe that values will be significantly depressed.”
Hotel owners across the country are struggle to survive, as air travel remains limited and many states are still only partially open. A recent report from the American Hotel and Lodging Association shows that nearly 25 percent of all trade guaranteed collateral loans for hotels are 30 days or more past due, citing data from Trepp.
In May, Barry Sternlicht of Starwood Capital Group said the pandemic had not yet resulted in a fire sale of hotels, but his company was looking for those deals. More recently, a Starwood fund sought to raise $ 11 billion for inheritance and troubled bets.
The CGI fund will buy hotels in the United States, Canada and the Caribbean at far lower prices than last year, Thomas said. Some hotels have sold for discounts of up to 30 percent during the pandemic.
The hotels would be under the Hilton brand, but the company is not a financial partner in future acquisitions.
The fund plans to reposition the properties under a new brand focused on social awareness, including community, health and sustainability issues.
Hilton was not immediately available for comment.
Hilton, one of the world’s largest hotel companies, has 18 brands spanning 6,200 properties and more than 983,000 hotel rooms. In its second quarter earnings call, Hilton Worldwide Holdings said it has opened 60 hotels with 6,800 rooms, despite a net loss of $ 432 million.
“We don’t cry in our milk. We have a business to manage ”, CEO Chris Nassetta mentionned. “This too should pass.”
CGI Merchant Group, a private equity and alternative investment management firm, focuses on value-added opportunities in South Florida. Over the past few months, he has spent over $ 400 million across multiple asset classes.
Thomas said the fund is positioned to be the first to walk out of the gate.
“We think there will be a recovery. This is what you do with the assets [once acquired],” he said.
Write to Katherine Kallergis at [email protected]
Clarification: Hilton is not a financial partner of the fund, but the hotels acquired would be under the Hilton brand.