Trinity eyes Pacific Rim with $3b Oaktree joint venture
Trinity eyes Pacific Rim with $3b Oaktree joint venture
28 AUGUST 2017 9:09 AM

Trinity Investments President and CEO Sean Hehir said his company’s new partnership with Oaktree has Trinity ready to close on a series of large acquisitions in Hawaii, Japan, Mexico and California.

HONOLULU—Following the April acquisition of the Westin Maui, Trinity Investments President and CEO Sean Hehir promised the deal was just the tip of the iceberg, as his company was ready to pounce on a number of deals.

Trinity now has the dry powder to turn that promise into reality following a newly formed joint venture with Oaktree Capital Management that will allow the two companies to invest as much as $3 billion in “high-quality, value-added hotels” in Hawaii, California, Mexico and Japan, primarily.

Hehir said the joint venture represents “a big push” for his company. Trinity also worked with Oaktree on the $317-million Westin Maui deal, which he said showcased how the strengths of the two companies pair well.

“Our teams work so well together,” he said. “We’re really complementary of each other. It seems to make sense to take that into a much larger platform. Now we have the capacity to be in the markets we want to be in.”

A wave of deals
Hehir said it won’t be long until the joint venture starts bearing fruit.

“We’re at work right now,” he said. “I expect within the next 90 days to have four or five sizable acquisitions we’ll be closing on. We’re in it right away, and with the scale we have, as markets see corrections, we’ll be ready to move opportunistically.”

Sean Hehir,
Trinity Investments

Hehir said the timing of deploying capital will be a market-by-market decision.

The newfound scale has several advantages, not the least of which is a level of sophistication and expertise that helps with an international portfolio and acquisition strategy, Hehir said. That’s important for a company like his that works on “complicated cross-border” transactions involving tax issues.

Two of the advantages “are the resources and people capital,” he said. “Oaktree has a deep bench.”

He said the joint venture also allows for a greater “speed of execution,” which will make both companies more competitive for deals.

Target markets
A significant portion of the acquisition dollars are expected to find their way to Trinity’s home state of Hawaii, Hehir said, noting he plans to “accumulate assets in Oahu and Waikiki.” He said he continues to be impressed by the supply-demand dynamics in the state.

“Being based here, we see things early that other groups don’t,” he said. “It’s absolutely a supply-constrained market. Other than timeshare and condo hotels, there’s no new development; as the world gets crazier, it will continue to be a flight to safety. We have intimate understanding of the demand drivers and are very bullish.”

Hehir also promised “a sizable acquisition in Mexico in the coming weeks.” He said his company’s strength in Mexico is based largely on the strength of relationships in that country.

“Our partner in Mexico comes from a prominent family and is well-respected,” he said. “That helps find and derive opportunities that others have a harder time finding.”

One of the biggest pieces of Trinity’s strategy in Japan will be an upcoming property with Okura Nikko Hotel Management Company. Hehir said there’s a lot of reason to be optimistic about travel to Japan, and he added his company is poised to capitalize on that with a strong team of Japanese nationals in place in Tokyo.

“That country is going through tremendous tourist growth … and it’s a market you can’t just show up as a foreigner and have access to opportunities,” he said.

Hehir called expansion into coastal California a natural extension of Trinity’s investment strategy around the Pacific.

“We’re looking for opportunities up and down the coast and seeing acquisition opportunities where we can add value and turn assets around,” he said.

Hehir believes Trinity’s reputation and track record will help with expansion in the booming state.

Investors “believe in what we’re able to do to turn properties around,” he said. “That makes us much more competitive.”

Beyond those targeted regions, Hehir said the joint venture will look at other gateway markets on an individual basis. He said if opportunities in other markets arise that meet the companies’ return thresholds and size requirements, they plan to investigate and possibly pursue them.

“If we believe we can bring value with better management, asset management, a brand change or whatever lever we might look at” we’ll pursue it, he said. “Oaktree has a broad reach, as well, and they’ll be coming across opportunities.”

How the deal came together
Hehir reiterated that the Westin Maui deal, which he described as a “complicated transaction,” helped prove to him how impressive Oaktree is as a company, and convinced officials on each side to work together.

“Through that natural discussion and asking what else (they) are doing, we started explaining” our strategy, he said. “The markets (we’re targeting) sounded interesting to them. So it started as a simple question from us, ‘Why don’t we form a larger platform together?’ That truly was the genesis.”

Hehir said the next step following the establishment of this larger platform will be to continue to follow the core mission to think locally while acting globally.

“I come back to the fact that real estate is a local business,” he said. “We’ll cherish and maintain those relationships that allow us to be successful. … And make sure we’re being the best stewards for our investors, lenders and team members. We don’t want to lose sight of that.”

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