Brilla Group has completed its first round of fundraising for the Colombian Beachfront Hospitality Private Equity Fund, which will invest in luxury hotels and resorts in the South American nation. The vehicle, which is the firm’s first institutional real estate fund, raised $30 million in equity from Bancoldex, Colombia’s Foreign Trade Bank, and three of the country’s six major pension funds.
David Brillembourg, Brilla’s chairman and chief executive, called Colombia one of the top emerging markets in Latin America, bolstered by annual GDP growth of 7 percent and tourism growth of 10.6 percent per year. “There’s immense interest from investors and brands to develop new hotels,” said Brillembourg. In addition, “you have very healthy diversified tourism sources coming in,” with demand from both domestic travellers as well as tourists from the US and the South American countries of Brazil, Peru and Chile.
Over the next eight years, the fund will invest in the region known as the Colombian Caribbean corridor, which includes the coastal cities of Santa Marta, Barranquilla and Cartagena. Brilla plans to open a new office in Bogota next month to support its Colombian investments, which will include new hotel construction, restructuring of unfinished projects and the acquisition of existing assets, often through joint ventures with local developers and investors. Additionally, the firm expects to build residential and mixed-use components in conjunction with about half of its hotel investments. So far, Brilla has identified a pipeline of 25 potential deals and expects to announce its first investment in the next three to four months.
In 2010, the Miami-based private equity firm launched a hotel fund targeting $200 million in equity for hospitality assets in Florida, the Caribbean and Latin America. However, Brilla subsequently revised its strategy and decided to dedicate the fund, which initially had a 40 percent allocation to Colombia, entirely to the country and invest in other markets through club deals with family offices in Latin America. To date, the firm has raised about $130 million through the club deal strategy and is seeking to collect a total of $100 million through the fund, which is targeting net returns in the low 20 percent range.
Brilla currently is targeting $40 million in commitments for its second offering of the fund, with a closing slated for July 2012. Like the first offering that just closed, the second offering is denominated in Colombian pesos. The third and final tranche of the fund will be dollar-denominated to attract investors that only can invest in that currency.