LRG launch hospitality fund

The Larkspur, California-based private equity and real estate firm is hoping to close on its $50m LRG Capital Hospitality Fund in the next few months. The vehicle will target early-stage restaurants affected with large debt loads.

LRG Capital, the private equity and real estate firm, has launched a new hospitality fund to target restaurants struggling for capital in the wake of the economic downturn.

The Larkspur, California-based firm, which manages real estate, emerging markets, debt and hedge funds, said the fund, LRG Capital Hospitality Fund, would focus on early-stage restaurant concepts in the US.

The fund is targeting $50 million and is expected to close in the next month or so.

Shah Bahreyni, fund manager, told PERE the fund was targeting casual dining restaurants, which were struggling in the wake of the liquidity freeze, or had over-leveraged the concept. Bahreyni said discounts were being offered of as much as 20 cents to 30 cents on the dollar.

“The industry is now coming back to what is used to be. The last few years were not usual for the restaurant industry, some companies need to find a way out and they are the assets we're interested in,” he said.

The fund is expected to invest $5 million to $15 million per deal in restaurants with 40 to 50 units and at least $500,000 to around $1 million in earnings before interest, taxes, depreciation and amortization. It is focused primarily along the West coast of the US, and is already working on two deals, including a 45-unit restaurant and 10-unit restaurant chain both offering “deep discounts”.

LRG said it would also consider co-investments with other private equity firms, and had already been approached by some buyout firms.

Bahreyni manages the fund along with LRG executives Evan Kraus, Lawrence Goldfarb and Aabi Shapoorian. Shapoorian previously worked for the American Restaurant Group/Spectrum Foods division, Constellation Concepts, Kimpton Group and The Puccini Group.