Northgate invests in Mexican hotel chain

The transaction marks the global private equity fund manager’s first investment in a real estate-related company.

Northgate Capital, a California-based global private equity fund manager, has made a MXN$530 million ($28.55 million; €25.31 million) investment in Grupo Estancias Extendidas. Mexico City-based private equity firm Alta Growth Capital (AGC) is a co-investor on the transaction, which represents Northgate’s first investment in a real estate-related company.

The hotel chain, also known as Extended Suites, is the first in Mexico to be focused solely on the low-cost extended stay market segment. The company will use the capital to bolster its expansion plan, which will involve the development of more than 40 new properties in the Latin American country over the next five years, beginning with the opening of at least eight new extended stay hotels during the next 12 months.

“Mexico is experiencing a strong inflow of capital in diverse industries that will fuel the need for extended stay accommodation in various regions of the country. This situation, combined with the lack of a standardized offer in the low-cost market segment, will allow Extended Suites to capture a large share of the market in the coming years. We are thrilled about this partnership and look forward to developing a successful growth story,” said Gabriel Mizrahi, director at Northgate Capital Mexico, in a statement.

“This partnership is exciting as Extended Suites is executing on its next stage of rapid growth nationwide,” said Efrain Lopez, chief financial officer of Extended Suites. “We are eager to work closely with Northgate Capital and Alta Growth Capital in delivering our value proposition to our target sectors. With our new investors support, we will expand our geographic footprint covering regions that are experiencing rapid economic growth. 

Extended Suites was founded in 2009 by a Mexican investment group in response to limited low-cost extended stay lodging options for the business traveler. The company currently operates three hotels in Monterrey, Coatzacoalcos and Ciudad del Carmen.

Founded in 2001, Northgate has more than 35 investment professionals across offices in the US, UK, Mexico, India and Australia. The firm had more than $4.8 billion of assets under management as of April 1. In April, The Capital Partnership, a London- and Dubai-based private investment office and asset manager, announced that it had agreed to acquire a 100 percent ownership stake in Northgate from Indian financial services company Religare and members of Northgate’s management team.

AGC, operating in Mexico since 2007, is focused on providing expansion capital to middle market companies in Mexico. The firm currently is investing its second fund.