Highgate's sale of minority stake could augur growth, exposure

Hotel management company Highgate Hotels has reportedly sold a minority stake to private-equity firm Trilantic Capital Partners, a move The Wall Street Journal calls a play for further expansion.

Specific terms of the deal were not disclosed, including price and percentage, however, according to Trilantic's website, the company's investment size ranges between $50 million and $250 million. It manages funds with $6.2 billion in assets.

Trilantic is based in New York and was formed in 2009 by five former Lehman Bros. employees.

The possible sale of a minority stake was first reported by The Wall Street Journal back in August, with a suggested sale price of $300 million.

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While Highgate, based in Norwalk, Conn., is a behind-the-scenes company, managing properties for the likes of Hilton Worldwide and Starwood Hotels and Resorts Worldwide, the sale has some believing Highgate will raise its profile.

The deal's official press statement sad that the transaction provides Highgate with access to significant capital and positions the company for accelerated growth in the hospitality management industry—in the U.S. and internationally.

Mahmood and Mehdi Khimji founded Highgate in 1989 and will continue to lead the company and remain the majority shareholders. In addition to an investment from Trilantic, Ares Capital Corporation provided the newly formed partnership with debt capital to pursue strategic growth initiatives.

"We have entered the next stage of our expansion strategy and are confident that our partnership with Trilantic will further strengthen Highgate's industry-leading position through organic growth, acquisitions and continuous innovation in hospitality management," said Mahmood Khimji. "We see tremendous opportunity to expand Highgate beyond our core hotel management capabilities and are in the process of aggressively targeting opportunities to enter both adjacent and complementary business lines, all with the objective of continuing to present cutting-edge capabilities to our clients."

"Highgate has distinguished itself as a clear leader in the hospitality industry and we are thrilled to partner with the company and its talented management team," added Jon Mattson, partner at Trilantic. "We look forward to helping Highgate execute on key growth initiatives and capitalize on the increasing demand for its services."

This is not the first time that a private equity firm took a position in a management company. In 2010, a venture between real-estate investor Thayer Lodging and China's Jin Jiang acquired Interstate Hotels & Resorts, known to be the largest independent hotel-management company in the U.S.. The deal was valued around $300 million.

Highgate manages about 60 hotels and around 20,000 rooms in New York and other cities, including San Francisco, Boston and Honolulu.

The Wall Street Journal further writes that Highgate often teams with a private-equity partner to buy a property, take over management, turn it around via lean operating model, then, after boosting profitability, sell its stake while holding on to the management contract.