DALLAS-With hotel investment at record highs, another joint venture alliance has come onto the playing field, pledging to spend $500 million on value-add deals within two years. It's projected the pool will end up with roughly 5,000 keys.

The JV is being funded with $150 million of equity from GoldenTree InSite Partners, Tom Shapiro, president of the New York City-based investment group, tells GlobeSt.com. The day-to-day work, including deal sourcing, falls to Dallas-based Aimbridge Hospitality while asset management and financing details belong to the third partner, JF Capital Advisors, also from New York City.

The trio's August 2006 acquisition of the 300-room Doubletree Hotel Campbell Centre-Dallas at 8250 N. Central Expressway and 248-key Doubletree Hotel-Denver Southeast at 13696 E. Iliff Place in Aurora, CO, sparked talks for a longer-running investment program as a launch pad for GoldenTree InSite's first hospitality pool, according to Shapiro. The two-year-old investment group is fueled by domestic and offshore investors.

Shapiro says there is no limit on the deal size, but he expects the norm to be $20 million to $50 million. He's anticipating a two- to four-year hold for most acquisitions, allowing enough time to implement management changes to glean upside in operations and cap-ex to heighten return on the resale market.

"We see tremendous ability to improve margins on certain hotel properties," Shapiro says. "We are looking at transitional hotel assets that we think have the ability to move income through operating efficiencies and capital improvements in order to drive EBITDA."

Aimbridge chairman Les Bentley says two portfolios are under negotiation for hotels in Southern California, Phoenix, Dallas, Chicago and Detroit. The scouting team also is reviewing some offerings in Orlando.

"The target is properties that need an infusion of capital, may or may not need a new brand and can benefit from new management," Bentley says. The four-year-old Aimbridge is an approved manager of Hilton, Marriott and Starwood brands, with its sweet spot being both full and limited service.

Bentley says the buying pool is aimed at distressed and value-add properties, relying on "FF&E"--which in hotel talk is furniture, fixtures and equipment--to drive the profit margin rather than full-body makeovers. He says the ballpark per-key price is $100,000, including the cap-ex allowance.

"I think it's really important for us to do good real estate. Tom is a very astute real estate investor," Bentley says. "And it's a very competitive market. Acquiring $500 million of good real estate is not going to be an easy task. But if we're smart, we can have a very successful investment vehicle."

According to Bentley, the buying pool can be expanded. Aimbridge also has ties to other investment partnerships, but the GoldenTree InSite is the largest by far. It's also fortuitous that Aimbridge is based in the backyard of one of the industry's top sellers these days, FelCor Lodging Trust Inc., which is holding brands on Aimbridge's preferred buy list.

Although the buying field is crowded, the JV is looking to pick off discards from some of the giants like the New York City-based Blackstone Group, which had a whirlwind 2006 buying entire companies, pruning the portfolios and keeping the cream of the crop. According to Chicago-based Jones Lang LaSalle Hotels, $72.5 billion was placed worldwide in 2006, up 62.9% from 2005's volume. It also was concluded that investors who bought US hotels in 2005 doubled their equity within a year.

"We expect 2007 will continue to propel additional investors to the market, including some non-traditional off-shore and high-net-worth investors, as well as institutional, pension fund, private equity and REIT off-shore buyers to the market," Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels, says in a release. "Further, we expect the public-to-private trend to continue, which will increase the availability of for-sale assets."

Also fueling the sales volume will be "continued shorter hold periods," assesses Kristina Paider, senior vice president of research and marketing for Jones Lang LaSalle Hotels. The hotel circuit is favoring an 18- to 24-month cycle rather than the traditional hold of three- to seven years, she says. The research's downside is 2007 global sales volumes are predicted to be marginally lower than last year, but that's coming out of Europe and not the US.