Broadshore Capital Announces ‘Timely’ Hospitality Investment

Seeking to capitalize on the hospitality industry’s general recovery from pandemic-fueled setbacks, Broadshore Capital Partners has established a $150 million hospitality investment program in partnership with a global alternative investment manager.

“[The situation] provides significant opportunities for our new hospitality investment program,” said Brad Howe, CEO of Broadshore, in prepared remarks. “[We are positioned] to take advantage of what we see as a significant market opening.”

Broadshore will invest debt and equity capital by originating new high yield financings, acquiring loans and making direct equity investments. The venture is focused on making loans, purchasing serviced and non-performing loans and acquiring hotels in the $10 million to $75 million range.

An ‘incredibly timely’ move

Kevin Davis, CEO of the Americas, JLL Hotels and Hospitality Group, tells GlobeSt.com that this is an “incredibly timely” entry into the lodging space with flexible capital that can invest across the capital structure.

“The recent volatility in the debt market and the increase in credit coupons will create interesting situational opportunities in the coming months, and this investment vehicle is ideally suited to take advantage of those opportunities,” Davis said.

Grant Puleo, a partner at Duane Morris, tells GlobeSt.com that leisure travel will likely recover relatively quickly, while business travel will take longer.

“However, both may look very different from their pre-Covid selves,” Puleo said. “There is pent-up demand for leisure hotel experiences with ‘smart’ and ‘sustainable’ hotels offering unique experiences best positioned to do well in the near and long term.

“Business travel when it returns may look very different, with fewer large conventions and workshops and more individual ‘work’ or ‘leisure’ trips where business travelers combine work and pleasure, again in products for hospitality that is smart, sustainable and unique.”

He said hotels that adapt to these emerging trends should do well in the near and long term compared to their counterparts that are slow to adapt to the post-COVID world.

Hotels fit to handle inflation

Cadre investment specialist David Vincent tells GlobeSt.com that he believes hospitality could be one of the best-positioned commercial real estate asset classes for the current inflationary environment.

“Because hotels can reprice daily, hotel owners have the ability to adjust to inflation in real time,” Vincent said. “This means hoteliers can adjust to inflation in real time.

“In our view, select-service hotels should outperform full-service hotels in the near future as the pool of labor willing to work for the prices offered shrinks.” When we look at select service hotels, we see that they offer fewer amenities and require fewer staff positions. They are therefore less affected by rising wages or labor shortages.

Vincent said that currently leisure properties are performing well, corporate centers are relatively weak and convention center business is extremely slow.

“While some inner-city hotels are offsetting reduced business travel with higher room rates, it remains unclear whether this will provide sufficient support to offset reduced demand and the potential negative impact of inflation on rising costs,” said Vincent.

For starters, the Broadshore Building in Seattle

Concurrent with the completion of the joint venture, the partnership closed a $19.8 million mezzanine construction loan to RevPAR Companies for the development of a 200-key AC hotel by Marriott at 117 Yale Avenue North in Seattle.

The new hotel in the famous South Lake Union neighborhood is a vital business center with Amazon, Facebook, Google and the Bill & Melinda Gates Foundation and numerous other corporations in the area.

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