Stoneleigh Capital, a Norwalk, Connecticut-based private equity firm that specialises in hospitality assets, has sponsored the formation of a $60 million equity fund to expand the portfolio of hotel properties run by the Capella Hotel Group. The $60 million fund, Stoneleigh WP Partners, is part of an open-ended partnership to expand the portfolio and operations of Capella, a global luxury hotel management firm formerly known as The West Paces Hotel Group.
Stoneleigh WP Partners allows Capella to enter management agreements with property owners that require the management company to have a financial stake in the property. The new partnership with Stoneleigh will allow Capella to acquire properties and build a portfolio, whereas it previously only managed its properties.
According to Frank Palmer, managing director of Stoneleigh Capital, the fund has been formed as a tool for Capella to take advantage of an investment niche in the hotel industry, “where in many cases there is a functional and financial distinction between the property owner and the entities providing management services and/or marketing and branding”.
A statement issued by Atlanta-based Capella said the investment from Stoneleigh will increase Capella’s expansion by twofold. The partnership thus far calls for the addition of five hotels over the next 12 months, as well as doubling the size of Capella over the next two years.
Horst Schulze, chief executive officer of Capella, told PERE that his firm was seeking a financial partner to help it expand its operations in the US and Europe. It found Stoneleigh to be a good fit, as the firm was seeking a partner, “not an employee”, as Schulze put it. “They like the platform we have,” he added.
“The hotel and resort industry has seen a full-scale reinvention since the beginning of 2011 and a revival of the need for money as a competitive tool for hotel operators,” Palmer said. “In order to be competitive in this environment, Capella needs to have the necessary tools, which is why Stoneleigh is providing this ‘sliver equity’ to the company through the Stoneleigh fund.”
Gary Engle, chief executive of Stoneleigh Capital, added that Capella’s “vision and drive for the highest level of personalized service, coupled with the strength of the company’s brand, are the key reasons for our investment decision”. Through the partnership, he said the firms “can capitalise on the great opportunities in the global luxury hospitality market and continue to nurture one of the most desired luxury brands”.