With the help of giant Ares, PE firm Excel with 27 hotels
today hopes to double in size in the next three or four years.
ARLINGTON, Virginia – Ares Management Real Estate
Secondaries funds (Ares) is investing an undisclosed amount in Arlington, Virginia-based
private equity firm Excel Group, which wants to double its current 27-property
hotel portfolio via acquisition over the next 36 to 48 months.
The investment by the global alternative investment manager
includes seed money for an existing Excel portfolio of eight Marriott- and
Hilton-branded limited- and select-service assets, as well as extended-stay
hotels concentrated across the high-demand U.S. east coast markets.
Excel Founder and Principal Shoham Amin told Hotel
Investment Today that about 60% of the Ares investment is going into the eight
assets with the other 40% allocated for acquisition with a target of reaching
around $400 million in total asset value.
“We’ve been working on this partnership for probably about a
year now,” Amin said. “We see it as a great advantage as we enter today’s
economic environment with opportunities both on the distress front and on deals
that have been sitting around the market for the past 24 months and have not
transacted.”
We’re starting to see some sellers begin to capitulate in terms of pricing expectations, which is leading to an inflection point where we can transact.
Shoham Amin
Amin said Excel Group is in buying mode because it thinks corporate
transient is poised, along with group, for an outsized recovery relative to some
of the other segments such as leisure.
“We’re still focused heavily on the micro markets. We’re
targeting assets and markets that we believe are poised for sizable growth over
the next 36 to 48 months,” Amin said. “We’re focused on demand drivers, and we’re
looking at opportunities where we’re starting to see some markets go backwards
that post-COVID saw significant outsized growth. We see opportunities in those
markets today in terms of being able to enter at a very attractive basis.”
Amin added that Excel is seeing some leisure markets going
sideways with negative RevPAR growth year-over-year. "We see that as potentially an
entry point today, being able to walk in at an attractive basis, and where we
still believe the fundamentals are strong,” he said.
Amin added that Excel has put a number of deals under
contract this year and half of them have been in the works for longer than a
year. “We’re starting to see some sellers begin to capitulate in terms of
pricing expectations, which is leading to an inflection point where we can
transact,” he said.
They [deals] are being relaunched at, call it, 10% to 15% below prior ask. It signals that sellers are being realistic.
Shoham Amin
He added that other investors in the market are starting to
see some deals come out that have been in the market previously. “They are
being relaunched at, call it, 10% to 15% below prior ask. It signals that
sellers are being realistic.”
When asked about the current macroeconomic conditions, Amin acknowledge
the situation but still thinks there’s going to be opportunities on the buy
side. “Along with everything going on in the media, there’s also this wave of
debt maturities,” he said. “There's roughly $145 billion in debt maturities in
the hotel sector across the next two years. We think that, combined with brand
pressure to renovate, along with capital stack pressure from investors and the end
of fund life there are deals that will clear the market, and with what we
believe will be attractive pricing, and in some cases distressed pricing.”
Year-over-year, Amin said Excel Group’s hotel portfolio is
up slightly for the first two months of the year.
“We’re continuing to reevaluate demand that we’re receiving
across various segments, and how we think that those segments could be impacted,”
Amin said. “But generally speaking, we feel like we’re pretty well positioned. A
majority of our portfolio sits here in the Northeast, which we think is going
to be tied to the recovery of the corporate sector, as well as group travel. There
is some uncertainty around government, and we’re continuing to just monitor
that going forward.”