Private Equity Is Beginning To Flow

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Last week, I wrote about the billions of dollars in equity sitting on the sidelines waiting for the right opportunities to invest in distressed hotel real estate. Since then, more information has come to light in support of that notion.

First, I heard from Lou Plasencia, chairman & CEO of The Plasencia Group. Commenting on my posting, he said, "Increasingly, a number of other, more entrepreneurial investors are not necessarily waiting for leverage to reappear.They are instead continuing to raise private equity from smaller, individual investors promising six- to eight-percent preferred returns. They may not have the buying power that a leveraged $3-billion private equity fund might have, e.g., Carlyle, Walton Street, but it is precisely because they don't have to worry about debt that they are going out and aggressively buying assets way ahead of the rest of the pack."

And a day after I heard from Lou, I learned that HEI Hotels & Resorts is about to launch its third equity fund that once leveraged will be able to acquire or develop between $1.5 billion and $2 billion in lodging real estate over the next two years. Given tumbling prices and looming desperation by many owners, the fund should be able to pick up quite a few properties and portfolios.

While these developments may constitute a trickle, that trickle can quickly become a torrent. If so, hotel real estate may be taking baby steps toward a turnaround.

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