Banyan Investment Group, a vertically integrated hotel investment company that acquires select-service hotels in the U.S., has revealed the $20-million first closing of Banyan Lodging Enhanced Value Fund LLC (BLEV), a fund vehicle that offers investors an opportunity to purchase hotels that have been impacted by the ongoing COVID-19 crisis. Soft circles from prospective investors suggest that BLEV will reach its $35 million hard cap early next year, well before the formal end of its offering period.
“The hospitality industry continues to reel from the COVID pandemic and its uneven recovery, and many markets continue to suffer from a sustained, record decline in hotel performance, a lack of liquidity in the capital markets and value dislocation,” said Andy Chopra, managing partner/CIO, Banyan Investment Group. “We believe the impact caused by the pandemic has created a number of investment opportunities, ranging from newer assets selling at below replacement costs to discounts resulting from owners facing liquidity crises. BLEV will take advantage of these prevailing headwinds as we move further into a post-pandemic world.”
BLEV has been structured to provide a superior return profile to investors versus a typical commingled fund, according to the company. The fund purposefully was created as a revolver, creating the ability to move and purchase quickly and backfill with external capital post-closing.
The fund will be used to form joint venture partnerships with institutional investors and/or syndicates of retail investors, implying total investable equity in the range of $350 million. BLEV will focus on high-barrier-to-entry hotel locations, targeting properties with significant discounts to replacement costs and/or historical sale prices. As the hospitality industry restabilizes, hotel sales prices are expected to rebound as well, providing superior, risk-adjusted returns for investors.
BLEV will pursue well-respected branded and independent hotels mainly in primary and secondary markets with multiple business and leisure demand generators. Targeted hotels will be highly transient-demand-oriented and range from 100-350 rooms. The fund allows for both individual property and portfolio acquisitions. BLEV will serve as general partner alongside institutional investors to acquire a collection of hotels—likely a dozen select-service, extended-stay, lifestyle or compact full-service hotels, segments which have clearly emerged as resilient performers in the post-pandemic environment.
“Having weathered multiple hospitality cycles, we have firsthand knowledge and experience of acquiring, owning and operating hotels through all phases of downturn and recovery,” said Rakesh Chauhan, managing partner/ CEO, Banyan Investment Group. “The velocity of this first raise was much stronger than we initially expected and has put us ahead of our own scheduling. We are confident that the time to capitalize is upon us, and we are looking for savvy investors to help take advantage of the situation.”