Equity International has closed on a commitment of $75 million to SAMHI, an emerging developer and owner of hotels in India. According to the Chicago-based real estate firm, the investment marks its foray into the Indian market.
Co-sponsored by global investment firm GTI Capital Group, SAMHI is a newly-formed hospitality property company based in Gurgaon, near Delhi. The company focuses on the development, acquisition and ownership of select-service, business-class hotels across India and has begun development on four properties totalling 630 rooms in Bangalore, Chennai and Gurgaon. These properties are being developed with brands such as Courtyard and Fairfield by Marriott and Hyatt Place.
SAMHI already is seeking opportunities in India's other top markets, including Delhi, Mumbai, Hyderabad, Pune and Kolkata. Recently, the company created a joint venture with Marriott International to develop Marriott-branded properties across India and is working with other hotel operators and brands on a selective basis. According to SAMHI co-founder and chief exectuvie officer Ashish Jakhanwala, the company hopes to double its development pipeline to more than 1,200 rooms by the second quarter of 2012.
“Equity International believes in building companies, not assets, and we're looking to build a company,” said Jakhanwala on the partnership. “We bring an understanding of the Indian market, and they bring a proven expertise in building companies to large scale.”
Gary Garrabrant, chief executive officer of Equity International, told PERE that his firm wanted to partner with SAMHI because of its smart business model in a market with growth potential in the metro areas of tier one and two cities. “India is rapidly urbanising, and the amount of business travel is extraordinary,” he said. “Hotel companies have chosen to establish a presence in India with five- and six-star hotels, which is great for brochures, but not practical for the average business traveller.”
Gaurav Burman, co-founder and general partner of GTI Capital Group, added: “If you look at the total number of rooms in the organised sector of India, there are only about 60,000 rooms, which is less than the number of rooms in Manhattan. Since India has a population of 1.2 billion people, the opportunity in this space is massive.”
Equity International committed the $75 million from its recently-closed fifth fund, which raised $650 million in equity commitments. The firm is targeting unlevered returns in the mid-teens.
Prior to forming SAMHI with Manav Thadani and Steve Rushmore, Jakhanwala previously led the development of Accor’s hotel portfolio in India.