PALM BEACH, FL-Driftwood Hospitality Management just inked a $400 million joint venture with a real estate investment fund managed and advised by affiliates of Apollo Global Management. The companies plan to invest the funds over the next two years.

“We’ve already spent $45 million on the purchase and renovation of a full-service hotel in the Midwest,” Brian Quinn, executive vice president and principal of Development for Driftwood Hospitality, tells GlobeSt.com. “We look forward to acquiring a variety of full-service hotels throughout the United States that are in need of renovation, and have the potential to be repositioned.”

Driftwood’s current portfolio includes 27 hotels with more than 5,900 rooms in major resort destinations and top business travel and convention markets in the United States, the Bahamas and Costa Rica. This portfolio spans independent boutique and resort locations, as well as franchises of nationally recognized hospitality brand systems such as InterContinental Hotels Group, Starwood Hotels & Resorts Worldwide, Hilton Worldwide, Carlson, Choice Hotels International and Wyndham Worldwide.

Raymond Mikulich, managing director and head of US Real Estate for Apollo, says the firms will capitalize on the “recovering hospitality market in the US.” Apollo Global Real Estate’s investment professionals manage $6.5 billion in real estate assets.

Indeed, the JV enters the market at a strategic time. The hotel industry recovery is still gaining momentum, though occupancy gains are outpacing room rate gains. So says the June 2011 edition of PKF Hospitality Research’s Hotel Horizons. PFK-HR is predicting the demand for US hotel rooms this year will climb 4.9% even as the average daily room rate rises 2.4%.

“We continue to be impressed by the pace at which travelers have returned to the road after the depths of the Great Recession,” says R. Mark Woodworth, president of PKF-HR. “Given the headwinds created by stagnant employment and continued weakness in the housing sector of the economy, it is somewhat surprising that hotel demand continues to bounce back as quickly as it has.”

Armet Capital was the investment advisor to Driftwood in the JV transaction. Jay Flannery, managing member of Armet Capital, will work with the JV management to implement the business strategy.

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