Brilla Group launches debut hotel fund targeting $200m

The group, founded by telecoms entrepreneur David Brillembourg, is targeting luxury beachfront hotels within three hours travelling time of Miami. The firm last year bought a Miami hotel for a group of family offices in a $30m all-cash deal.

Brilla Group has launched its first institutional real estate fund as it looks to raise $200 million of equity for hospitality assets in Florida, the Caribbean and Latin America.

The firm, founded by telecoms entrepreneur David Brillembourg in 2007, expects to raise capital from pension funds in Latin America, particularly Colombia, Peru and Chile, as well as the US and will also look to high-net-worth families in Latin America.

The vehicle, which has yet to be named according to people familiar with the matter, will target luxury beachfront properties and developments, all within a three-hour radius of Miami.

The fund is expected to target over-leveraged properties with existing cash flows, where owners may be unable to refinance or inject additional capital; partially completed properties as well as greenfield developments, for emerging market countries such as Colombia.

Brillembourg declined to comment on the fund, but said the luxury hospitality sector was becoming increasingly attractive, after experiencing a dramatic fall-off in demand.

We are beginning to see a stabilisation of the overall hotel industry after the sector hit bottom.

David Brillembourg

According to research by hospitality research firm, Smith Travel Research, the luxury hotel market in the US saw the highest percentage increase in customer demand in the year to April 2010, rising 15.7 percent compared to 9.8 percent for upper upscale hotels, 15.5 percent for upscale, 6.7 percent for midscale without food and beverage and 1.7 percent for economy.

“We are beginning to see a stabilisation of the overall hotel industry after the sector hit bottom in terms of asset operations,” said Brillembourg. However, he warned there was still a “significant amount of distress” that had to be worked through, not least in restructuring the debt loads of many hotels.

Last October, Brilla Group acquired the Raleigh Hotel on Collins Avenue in South Beach, Miami, for just under $30 million in an all-cash deal. Brillembourg said the deal was done in partnership with a group of Latin American family offices. According to data provider Real Capital Analytics the hotel was bought from Andre Balazs Properties, the designer behind New York's Standard Hotel.

The firm plans to invest up to $8 million refurbishing the property over the next 18 months. “The hospitality industry is interesting because there are a large amount of players in the sector but few with real scale and almost no-one specialised in beachfront investing,” adds Brillembourg, who founded the mobile text messaging outsourcing company CycleLogic in 1995 and the mobile pre-paid card company Embida Technologies in 2002.

“That’s what makes it interesting at the moment, together with distress that the sector has seen, it means now is a very good time to be deploying capital,” he said. “Although that’s not to say it’s not going to be tough environment for next 18 months.”