Thayer Lodging Group, a privately held, real estate investment company, today announced the final closing of Thayer Hotel Investors V LP and a parallel fund, Thayer Hotel Investors V-A LP. With approximately $280 million in equity commitments, the new discretionary equity funds for lodging investments expect to selectively acquire between $600 and $700 million in hospitality assets over the next 36 months. Since 1991, the company has acquired approximately $1.8 billion in hotels and resorts. Funds V and V-A are the largest in the company's history.
"Given the current economic environment, we are particularly gratified that more than 70 percent of Fund V investors also were participants in our previous funds," said Frederic V. Malek, Thayer's co-chairman. Historically, Thayer's funds combined have realized a 29 percent internal rate of return and a 2.6 multiple on invested equity.
Added Leland C. Pillsbury, Thayer's co-chairman and chief executive officer, "We believe the next few years will present the best hotel investment opportunity in a generation. Hotel cash flows are being dramatically impacted by record declines in revenue per available room (RevPAR) due to the worst recession since the Great Depression. The current credit market dislocations, combined with the severe deterioration in hotel fundamentals, will create a wide array of acquisition opportunities."
Fund V will employ Thayer's time-tested, value-add strategy of acquiring upper-upscale and luxury hotels that require extensive renovations, market repositioning, asset rebranding and operating cost reduction. Target acquisitions, primarily in markets with high barriers to entry, will be concentrated in the U.S. The company expects to source transactions from owners, management companies, lenders and brokers.
"We don't anticipate that the U.S. hotel industry will experience a meaningful recovery until 2011, which will result in more assets coming to the market in the immediate future," said officer Bruce Wiles, Thayer's chief operating officer. "We expect the acquisition market to accelerate substantially in 2010 and intend to capitalize on our reputation for a creative, collaborative approach to working with lenders and owners to structure transactions where we can create value through our extensive lodging expertise, our innovations and creative strategies, and our strategic relationships with major hotel brands."
Jin Lee, Thayer's chief investment officer and managing director, noted that the company has an active pipeline that includes both asset acquisitions and equity recapitalizations. "In addition to traditional acquisitions, we are looking at opportunities where we can participate in recapitalizations and other structured equity investments. For quality assets that have debt issues, we can provide fresh equity to help facilitate a workout and restructuring of the debt and equity."
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