Partners each contribute €250m of equity to launch €1.5bn opportunity vehicle that will target hospitality assets and will acquire €400m of hotels by the end of the year
Central and Eastern Europe investor Orco Property Group and AIG Global Real Estate Investment are launching a €1.5bn opportunity fund for hotels in the region.
Orco’s hotel investment vehicle Endurance Hospitality Sub Fund (EHSF) is buying hotels which Orco has developed. The real estate arm of US insurance and financial services giant AIG is taking a 50% stake in the fund.
Although neither Orco nor AIG would comment on the proposed vehicle, it is understood that AIG and the EHSF will each contribute initially €250m of equity.
EHSF is an opportunistic fund targeting hospitality assets in Europe, particularly CEE. It was seeded in June with a stake in a 10-asset portfolio developed by Orco in Central Europe and Russia worth €166m. The fund is acquiring at least five more hotels totalling €400m by the end of the year, including assets in Prague and Moscow.
The fund focuses on assets with redevelopment or repositioning potential and targets a return of at least 20% IRR for its investors. It aims to strike a balance between lower risk/return investments in capital cities in Central Europe and higher risk/return investments in secondary cities in Central Europe, Russia and the Balkans.
EHSF’s focuses on large assets that will be managed and branded with international operators such as Marriott, Starwood, and Hilton. For smaller, turnaround acquisitions, the vehicle will rely on MaMaison Hotels & Apartments, an Orco subsidiary, which already manages some of the assets owned by the fund. The Orco/AIG vehicle will also develop new investments.
The hospitality ventures are one of a series of funds that Orco has recently launched under the closed-end umbrella of Endurance Fund.
