ATLANTA—It wasn’t a lack of interest that slowed the progress of Horst Schulze’s West Paces Hotel Group. It was a lack of capital.
That’s why the veteran hotelier, formerly president of Ritz-Carlton and current chairman and CEO of his luxury hotel management company, turned to private equity firm Stoneleigh Capital to kick expansion of his luxury hotel company into high gear.
The move officially was announced Wednesday, along with West Paces’ rebranding as Capella Hotel Group.
“We have an exceptional amount of deal flow coming into us. People would approach us and say, ‘We would like you to run one of our hotels,’” Schulze said during a telephone interview. “However … everybody who has a hotel and every bank insists that the operator also makes a financial contribution to the hotel in one form or the other. Some want sliver investments. Some want a major investment in the hotel. Some want a mezzanine loan. Some want to sell the hotel.”
Without the necessary capital reserves, Schulze was forced to pass. But then he was struck with the idea to find a financial partner who could back West Paces on those deals.
Stoneleigh, with an expertise in hospitality investments, emerged as an ideal candidate.
“It all comes logically together,” Schulze said. “The name and all that comes logically together, and there is so much opportunity around the world.”
Stoneleigh, whose recent investors include JP Morgan Private Equity Limited, formed Stoneleigh WP Partners LLC to make its investment in the newly rebranded Capella Hotel Group. The firm is a minority investor in Capella and created a US$60-million fund for sliver investments only, Schulze said.
In addition, Stoneleigh WP Partners will seek to co-invest with owners of hotel and resort properties that expand the Capella and Solís brands.
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A new name
The rebranding from West Paces to Capella Hotel Group was purely opportunistic, Schulze said.
“The Capella (hotels) has, in a short time, developed an unbelievably great reputation. There’s a real halo around them now,” he said. “Because of that … I wanted to cash in on it, quite frankly. I’m being opportunistic.
Because more people are familiar with the Capella brand, Schulze said that investors will no longer ask “What is West Paces?” like they did previously.
There are five Capella Hotels open, including locations in Cabo San Lucas, Mexico; Dusseldorf, Germany; Ixtapa, Mexico; Sentosa Islands, Singapore; and New York City.
The Capella Singapore has the highest occupancy and highest rate in all of Singapore, Schulze said. The Breidenbacher Hof, a Capella Hotel in Dusseldorf, garners the second highest rate and occupancy in Germany, he added.
The company also operates the luxury Solís brand (with properties in Donegal, Ireland; and Shenzhen, China) and a collection of independent properties in Indonesia, Switzerland, the United States and England.
There are 14 hotels in Capella’s portfolio. Schulze said Capella operates at the very high-end of the market, while Solís is comparable to Four Seasons and Mandarin Oriental.
The company’s partnership with Stoneleigh will help boost development of both brands and the independent hotel collection, Schulze said. He expects to finish 2012 with 20 properties in the management portfolio.
The middle-term priority is on key gateway cities throughout the world, while the short-term focus is on developing a presence in the U.S., he said.
“Brands today … have to be global. You have to grow globally. … I’d like to be in the key cities in every country, in the gateway cities in every country. Obviously New York is a major place, so is London, so is Tokyo and so on.”
Within the next two or three years, Schulze expects to have approximately 40 hotels in the portfolio.
“That is very much within reach, and we’re pretty certain that we will have it,” he said.