Dive Brief:
- First Hospitality opened up its decades-old investment arm, First Investors, to outside capital and launched the First Investors GP Fund to deploy $400 million in hotel acquisitions, the Chicago-based firm announced in a release obtained by Hotel Dive.
- First Hospitality anticipates that the GP Fund will supply sponsor capital for investment in six to 10 hotels over the next two to three years, targeting 150- to 350-key premium-branded or independent lifestyle hotels in growth markets.
- First Hospitality CEO David Duncan told Hotel Dive that while the firm favors regions with strong demographic trends and diverse demand drivers for investment, it will operate with a flexible approach to geography “in which we place greater emphasis on the asset-level story than on fitting within a predefined market thesis.”
Dive Insight:
The GP Fund platform is led by Duncan and governed by an ownership group under Executive Chairman Sam Schwartz and founder and Chairman Emeritus Stephen Schwartz. Collectively, the three executives have led more than $10 billion in hospitality transactions, according to the release.
“Approximately 20 percent of the fund will be our own capital, giving the firm and its senior leaders substantial skin in every transaction,” Sam Schwartz said in a statement.
Since launching in 1985, the First Investors platform and its affiliates have completed 45 hotel transactions and currently own joint-venture positions in 18 hotels spanning 3,100 keys.
First Investors “benefits from direct alignment” with First Hospitality’s operating platform, “providing early visibility into local market dynamics and operational trends well before they appear in public data,” Duncan said in a statement. “This vertical integration provides a differentiated advantage for our investors, particularly in today’s market environment, where dislocation is creating some very unique investment opportunities.”
Duncan told Hotel Dive that First Investors expects the national transaction environment to “remain relatively stagnant in the near-term.
“As a result, we believe the most compelling hotel investment opportunities will be idiosyncratic — one-off dislocations at the asset level, often driven by distress at the property or capital structure,” he added.
Duncan said the GP Fund will be particularly drawn to assets “where the demand fundamentals align with our operational strengths, regardless of location.”
Though some real estate investment trusts scaled back hotel investments in recent months, urban hotels in particular have remained a favored target for acquisitions, according to JLL research released last week.
