The hotel doctor

Fairfax, Virgina-based Crescent Hotels and Resorts has launched an acquisition fund and expects to add more than $1 billion (€790 million) in assets over the next 18 months. The former hotel management company recently re-branded itself and changed its name to reflect its expanded business platform, which now includes the private equity real estate fund in addition to its role as owner and operator.

“We're hotel doctors,” says Crescent chief executive and president Michael George, who founded the company as Crescent Hospitality in 2001.“We really look for assets that are in a healthy market. It doesn't have to be a homerun market or in a major urban market,” just one with barriers to entry.

While the fund may be new, the idea to raise equity from outside investors was not, according to George. And some of those behind Crescent have a long track record in the hotel and investment industry—Washington DC-based business development firm Allied Capital has invested $10 million, and DC-based real estate investor Robert Roskind, who founded CapStar Hotels and Resorts, the predecessor to MeriStar Hospitality, serves as the company's chairman.

“Our decision was that we would launch the company as a pure third-party management organization—very intense, high-impact turnaround specialists,” says George. “But over a period of time of three to five years, we said we would establish enough size, bulk, infrastructure and reputation to be able to attract equity and be able to evolve into hotel ownership.”

Crescent's new business platform will focus on acquisitions as well as third-party management. The company currently operates 35 hotels in 21 states.

The fund will be national in scope and target hotels in the “upper upscale” category that are in need of improvements or repositioning, focusing on properties under the Renaissance, Hilton, Marriott, Westin, Sheraton and Embassy Suites banners.

A typical play for Crescent, “might be a 20-yearold box that has an established reputation but has management that's maybe gotten a little bit lethargic [with a property that] could use some product enhancements or potentially could be rebranded,” says George.

The firm recently announced the acquisition of the Marriott in Livonia, Michigan. Crescent's investment will be about $25 million.

BPG launches eighth vehicle
BPG Properties has already raised approximately $500 million (€390 million) for its latest value-added offering, BPG Investment Partnership VIII. The vehicle has a target of $650 million to $750 million in equity and is expected to have more than $2 billion in buying power. BPG expects to hold the fund's only close towards the end of the second quarter of 2007, according to chief executive officer Dan DiLella. The vehicle will target returns in the mid-teens and have an eight-year life span. Management will contribute at least $65 million. Like its two immediate predecessors, the eighth vehicle will be national in scope. Nevertheless, the firm may seek to break into some new markets or step up activity in others, particularly on the West Coast.

Colesville's debut closes on $300m
Silver Spring, Maryland-based Colesville Partners has closed its debut offering on $300 million (€235 million) in equity commitments and is expected to have $1 billion in buying power, according to reports. Silver Spring-based Sunburst Hospitality, which owns and operates more than 40 hotels, is Colesville's primary sponsor, although the fund also drew contributions from high-net worth individuals. Kevin Hanley, the hotel firm's president, will also serve as managing director of Colesville Partners. Colesville will invest in a variety of platforms across sectors, including hotel, multi-family, self-storage, golf and office. The firm targets transactions worth between $5 million and $70 million in and around major markets along the East Coast.

Allstate commits to Rockwood's seventh
Allstate Investment Group has committed $60 million (€47 million) to the seventh vehicle from Rockwood Capital Partners, which has a $1 billion target. The investment arm of the insurance giant also invested in Rockwood's sixth vehicle, which closed on $657 million in December 2005. Allstate manages more than $17 billion in real estate assets. Earlier this year, Edgar Alvarado was promoted to head of real estate funds at Allstate Real Estate Investment Group. Rockwood, led by executive managing director Edmond Kavounas, currently manages $1.5 billion of equity commitments and has produced an IRR of more than 15 percent since it was founded in 1980.

Keystone targets new markets
Keystone Property Group has closed its second private equity real estate fund on $111 million (€87 million), more than three times the size of its $35 million predecessor. Through the new vehicle, which has already committed about a third of its capital, the Conshohocken, Pennsylvania-based firm wants to expand beyond its traditional investment territory in the Philadelphia suburbs, southern New Jersey and Delaware. It will also target Metro Chicago, South Florida, Washington DC and Baltimore. KPG, which targets office and industrial properties with upside potential, recently made its first investment in the Chicago suburbs.