ATLANTA—Kimpton Hotel & Restaurant Group LLC is certainly no newbie to fundraising. The company has closed four institutional funds and since 1997 has raised approximately $700 million in equity.
Yet despite that track record, the fundraising environment today remains a challenging one, Kimpton CEO Mike Depatie said during a break last month at the 25th annual Hunter Hotel Conference.
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| Mike Depatie, Kimpton Hotel & Restaurant Group LLC |
“I would say that the raising of a dedicated fund is extremely difficult,” Depatie said.
Kimpton, which has 58 hotels in its portfolio, recently closed on a $203-million equity fund that can be leveraged up to do more than $500 million in acquisition or development. It took the company a year to raise the equity, he said.
Much of the fund was raised by going back to existing investors, he said, adding Kimpton did not use a placement agent.
Financing
Depatie said lenders are more aggressively underwriting loans these days as competition increases.
“But they’re still looking at 10%, 11% kind of debt yield on a traditional loan,” he said. “But there is now mezzanine debt that is available, so you can leverage up further than you could before. It’s a typical cycle. We’re going through the cycle.
“We’re going to see more entrants. I think we’re going to see financing get more competitive if you’re a lender. And you’re going to see the amount of leverage people can get go up, which is probably going to impact pricing on assets on the upside.”
Debt yield remains the top priority for lenders, he said.
“That’s where it starts,” Depatie said. “Sponsorship matters as well, obviously. CMBS is coming back, and CMBS is starting to tempt people with fairly low interest rates and very low spreads and terms that are more attractive generally than the banks. So it’s just getting more competitive all the way around.”