The first fund, which is focused on buying distressed hotel properties in India and South East Asia, will total approximately $300 million. The second fund, which is focused on acquiring hotels in Europe, will total around $296 million. Both are expected to increase capital by October. Meanwhile, the third fund, which is focused on the Middle East and Africa, is still being planned out, Rahul Chaudhary, ED of Chaudhary Group, told Deal Street Asia.
The company has planned to use the funds within the next two to three years and to buy about 20 hotel properties through these funds. The group has planned to expand its portfolio by doubling its size and expects to acquire 200 hotels by 2020.
As part of the plans, the group will manage and be an anchor investor in all the funds by investing 20 percent of its total capital in each. The remaining funds will be raised through institutional investors, private equity firms and high net-worth individuals. “So far we have only invested our own money. We are looking at doing these fund structure for the first time. The biggest idea of getting into this route is that it allows us to exit after a span of 5-7 years, and you make the best of out of the capital gains,” he said.
The group operates and manages around 90 hotels with about 5,000 guestrooms in 60 cities globally under CG Hotels & Resorts. Chaudhary partners with the Taj Group in JV deals to jointly manage over 10 hotels in India, Nepal, Sri Lanka and the UAE. “The valuation of our hospitality business is close to half a billion dollars,” Chaudhary said. “Year-on-year our revenue is growing 15-20 percent. We intend to keep that momentum and once we reach 2020, that number is going to increase substantially.”
As hotel occupancy has improved over the last two years, property developers and private equity funds have slowly returned to the hospitality market. JLL's Hotel Investment Outlook 2017 data showed hotel real estate transactions are expected to rise to about $60 billion globally, similar to 2016's total. In 2017, India had some significant hotel transactions, including the acquisition of the majority stake in domestic hotel management company Sarovar Hotels, a Louvre Hotels Group and Jin Jiang International brand.
This year, JLL also reported about 70 to 80 hotels in India are on the market. Investors are eyeing opportunities to buy suitable operating assets in key markets at discounted prices in order to increase returns on investment while the hotel industry performance rebounds and the global economy enhances.