Yale University Funding Kimpton Acquisitions

SAN FRANCISCO-Kimpton Hotel parent Kimpton Group Holding says it has formed a fund to acquire, develop and redevelop boutique and lifestyle hotel properties in major US metropolitan cities and resort areas across the country. Using $175 million in equity committed by Yale University and others, the KHP Fund seeks to acquire $450-million worth of hotel properties over the next two years, which loosely translates to between 10 and 15 properties, or between 2,500 and 3,000 rooms. Kimpton Real Estate CEO Mike Depatie declined to confirm Yale University’s involvement, but tells GlobeSt.com that Kimpton has used the equity commitments to obtain a line of credit with Bank of America. Depatie adds that the company’s typical acquisition will be a 200- to 250-room property for between $30 million and $40 million, depending on the state of the building. “What’s key about this fund is we have total discretion [and] can close very quickly,” Depatie tells GlobeSt.com. “Because we control the brand, we don’t have to negotiate a management contract; we don’t have to clear a purchase through the bank because we already have the line of credit; we don’t have to get equity partner approval because we already have the line of credit.”Depatie says its investments may involve acquiring existing hotels in desirable locations where the property is underutilized and where opportunities exist to reposition as a Kimpton hotel; acquiring non-hotel buildings that can be converted to Kimpton hotel properties; acquiring or developing Kimpton hotels within mixed-use developments, and; acquiring boutique hotels in good physical condition but in need of some redevelopment or repositioning. “The timing is ripe for investment in the hotel sector,” Depatie says. “Many hotels are still under-performing due to the severity of the recent economic downturn, lack of capital or ineffective management. Most industry experts are predicting a further rebound in the hospitality sector, estimating room revenue growth to increase by more than seven percent this year and more than six percent in 2006.” Kimpton’s primary target — urban and resort markets for acquisitions include New York, Boston, Washington, DC, Miami and other South Florida cities, Los Angeles, Napa Valley, San Diego, Seattle and Chicago. Depatie says the fund will play a critical role in Kimpton’s plans for growth, which include additions to the company’s existing 39 properties, about half of which are owned and half of which are managed for third parties. Over the next five years, the company reportedly plans to acquire 20 to 25 new properties in addition to its existing portfolio. It also plans to grow its third party management business and, in so doing, expand its Hotel Palomar sub-brand to new markets. Earlier this month, Kimpton said it is expanding the brand through third-party management contracts for new hotel properties in Dallas and Arlington, VA, as well as other urban locations to be announced later this summer. Kimpton’s Hotel Monaco brand is now on seven hotels across the US. The new Palomar Hotels include a 198-room property in Dallas that is owned by Behringer Harvard and Realty America Group and scheduled to open in the Park Cities neighborhood in April 2006. The project will include 72 for-sale residential units that also will carry the Palomar brand. The other known property will be at the foot of Key Bridge in Arlington and will be called Arlington at Waterview. Being developed by the JBG Cos., Trizec Office Properties and CIM Group, this too will be a mixed-use development, with 154 hotel rooms and an unknown number of condominiums in a 29-story tower. Completion of the tower is slated for August 2007.In addition to expanding its existing brands, Kimpton Hotels EVP of acquisitions Joseph Long tells GlobeSt.com that the company will continue to do one-off themed hotels “in markets where we think something different makes sense.”