ANNAPOLIS, MD—Last week, GlobeSt.com reported on Brookfield Asset Management‘s acquisition of Thayer Lodging Group, a locally based hotel investment company. The move was a shift from Toronto-based Brookfield’s typical investments in the “four core” real estate sectors. As for Thayer, it will continue to operate as usual, focusing on its investment management, asset management and property management businesses, but as a subsidiary of Brookfield.
Meanwhile, Thayer president Bruce Wiles will continue to run the operations and oversee employees. Leland C. Pillsbury and Fred V. Malek, Thayer’s co-founders and chairmen, will serve as co-chairmen & co-heads of Global Lodging of the new company and as senior advisors to Brookfield.
The deal came as a surprise to industry observers, since Thayer wasn’t on the market and Brookfield isn’t typically a player in the lodging sector. In a conversation with GlobeSt.com, Pillsbury explained that the firm’s management got to know Brookfield last year and “quickly came to understand the mutual benefit of a potential association. For Thayer, Brookfield provides a robust capital source for future deals. For Brookfield, we provide a portal to attractive real estate investment opportunities, a proven value-added operating partner, and a profitable operating platform in the hotel industry.”
At the time the acquisition was announced, Pillsbury called the deal “the capstone of a quarter-century of growth and a clear signal that the best days for investing in global hotel real estate are yet ahead.”
As for Brookfield’s interest in the lodging space, Pillsbury says it has to do with timing. “We believe the hotel space is in the ‘early innings’ of a long recovery, which will present outstanding growth and acquisition for years to come, and Brookfield is interested to participate actively,” he relates. He does, however, deferring specific reasons for Brookfield’s decision to the firm’s management. Brookfield did not respond to inquiries from GlobeSt.com.
Aside from having more capital behind it, Thayer doesn’t expect many changes. Some 20 Thayer employees will be taken into Brookfield’s fold. “At Thayer, we will continue to do what we have always done—acquire hotel real estate below replacement cost, and aggressively increase NOI by increasing market share, managing channels of distribution and controlling costs,” says Pillsbury.
The transaction gives Brookfield a hotel investment management business built on 25 years of success. Since forming its first private equity fund more than two decades ago, Thayer completed 43 hotel investments with a total acquisition cost of approximately $2.5 billion. Notably, Thayer formed a joint venture 10 years ago with Jin Jiang Group, China’s largest hotel and hospitality company, and in 2010 the duo acquired Interstate Hotels and Resorts. It was the largest third-party, independent hotel manager in the word, with some 27,000 employees, 400 hotels, annual sales of over $2.7 billion and $10 billion of assets under management in Europe, Asia and the US.
Going forward, Pillsbury is nothing but optimistic, not paying any heed to concerns some may have about overheating in the market. “We believe the prospects are very bright—for the company, the industry and the environment for acquiring distinctive properties around the world,” he says, promising, “You will be hearing a great deal from us.