Toronto asset manager checks into hotels with Thayer Lodging acquisition

(Ritz Carlton)

Big acquisition news today: Toronto-based Brookfield Asset Management, reportedly Canada’s biggest manager of alternative assets, has bought Thayer Lodging Group, a private-equity group highly invested in hotels. Terms of the deal were not disclosed.

Up to now, Brookfield's balance sheet has mostly composed office buildings and shopping malls. That, now, will change. Thayer's seven funds have made 43 hotel investments with total acquisition costs of about $2.5 billion. Its properties include The Ritz-Carlton, San Francisco (pictured), and the Hilton Los Cabos Beach & Golf Resort in Cabo San Lucas, Mexico.

The deal does not include Interstate Hotels & Resorts, which Thayer and partner Jin Jiang acquired in 2010.

According to Bloomberg, the acquisition was completed last week following negotiations that started in November.

"This transaction will provide us with ample resources to grow our business," Bruce Wiles, Thayer's COO, told Bloomberg. "The competition for hotel assets has been pretty keen lately. We do value-add work, we take large assets that aren’t performing well and turn them around. With Brookfield we are at a much better vantage point."

Brookfield's interest in lodging is one of the latest signs of the continued strength and rebound of the industry, which hit its nadir in 2009, only to bounce fully back some five years later. According to The Wall Street Journal and citing JLL data, the value of U.S. hotel sales last year was $22 billion, up 35 percent from 2012. Revenue per available room rose 6.8 percent in the first quarter compared with the same period last year, according to STR.

Brookfield's assets include downtown Manhattan's World Financial Center, an office and shopping-center complex now known as Brookfield Place.

Brookfield did have two hotel assets before the deal: the Atlantis resort in the Bahamas and the Hard Rock Hotel in Las Vegas.

"We haven't made investments in the hotel sector largely because we lacked the operating experience,"Richard Clark, chief executive of Brookfield's global real-estate group, told The Wall Street Journal. "Having this platform gives us the confidence to make direct equity investments in hotels."

Thayer Lodging was founded 25 years ago by hotel veteran Leland Pillsbury and Fred Malek, a former president of Marriott and Northwest Airlines.

Thayer recently had to bring in partners on large deals because the size of its funds limited how much it could invest in a single property, WSJ wrote. But with Brookfield's resources, "we can do it on our own," Malek said.