MEMPHIS, Tennessee—Fairwood Capital LLC is scouring university and state capitol markets in the United States in a search to round out the firm’s hotel fund.
The company two years ago began its fund with US$300 million of invested capital. To date, the fund has acquired seven hotels comprising approximately 1,100 rooms, according to executive VP Ed Ansbro. The seven deals represent a total investment on the part of the fund of between US$125 million and US$130 million.
“Our business plan is to go out and take advantage of some of the value opportunities (in the marketplace)”, Ansbro said. To date, the fund has been taking 100% ownership in hotels, though the firm also would consider the purchase of hotel notes, he added.
The fund is seeking select-service, extended-stay and smaller full-service properties with the major brands, he said. The firm is seeking hotels in university and state capitol markets because those areas seem to be more resilient in this kind of recovering economy, Ansbro noted.
“We’ve been trying to be very active … buy at a level where we can enjoy the upside,” he said.
The fund, which is searching the top 40 metropolitan statistical areas for potential deals, likely will invest in an additional eight to 10 more hotels, Ansbro said.
Transactions market
Fairwood, with offices in New York and Memphis, Tennessee, most recently acquired the 317-room Hilton Knoxville from Knoxville Hotel 2004 LLC for an undisclosed price on 8 March. Ansbro acknowledged the hotel transactions market appears to be picking up.
“It’s certainly a lot more active than it was six months ago,” he said.
Banks and special servicers are more aggressive in moving properties to market. “My sense is the market has opened up quite a bit for cash-flowing assets,” he said.
There still remains a little bit of a discrepancy between what sellers are asking and what buyers are willing to pay, he added.
Also, today’s market is bifurcated, Ansbro said. On one side are the public real-estate investment trusts. On the other side is everyone else. Thus far, Fairwood hasn’t butted heads with too many of the high-profile public REITs as they appear to be going after higher chain-scale hotels, Ansbro said.
Fairwood’s deals so far have been all equity plays, but the firm is willing to take on some debt. “There is a lot more debt out there now than six months ago,” he said.
