Under the agreement, Carlyle Group will fund up to 90% of the equity of an acquisition, with MHI kicking in between 10% and 25%. MHI is also responsible for sourcing the investment opportunities, which are expected to fall in the $30 million or more range.
MHI Hotels Services LLC will manage the hotels acquired by the joint venture and be paid a fee of 1.5% of the hotels' gross revenues. The deal also gives MHI a first right of offer to any investment within the joint venture.
Washington, DC-based Perseus Realty Capital acted as agent and arranger of the venture, according to a release.
Andrew Sims, president and CEO of MHI Hospitality, notes that the JV will give it a wider range of investment opportunities, namely larger hotel assets and portfolios. "We believe this venture is consistent with our core strategy and presents an additional means for us to create significant long-term value for our shareholders," he says in a statement.
Currently, MHI's portfolio consists of 1,723-keys spread across seven properties, all of which operate under the Hilton, InterContinental Hotels Group and Starwood Hotels and Resorts flags.
The Carlyle-MHI tie-up is indicative of a long-standing trend that has gained significant momentum over this current hotel cycle: that is, of equity partnering with industry knowledge to eek out the best deals. Financial partners are increasingly realizing that they need active management.
The Carlyle Group has made a number of hotel equity investments via a partnership in recent months, including a venture--its first--with Crescent Hotels & Resorts to acquire a 205-key hotel in Beltsville, MD.
On the north side of Dallas it acquired, via joint venture with Memphis-based Davidson Hotel Co., the Houston Sofitel Hotel from Accor Worldwide of France at the beginning of the year.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
