$1.5B Distress Hotel Fund Comes to Market
Sovereign wealth funds, family offices, pensions, endowments and foundations, and financial institutions were among the investors.
Certares Management and Knighthead Capital Management have closed their first co-managed fund: the CK Opportunities Fund, which focuses on travel, tourism and hospitality companies that are facing acute liquidity and financing needs.
At $1.5 billion, it substantially exceeded its initial target of $1 billion during the six months it was raised virtually.
The sponsors said it received strong support from a diversified global investor base, including sovereign wealth funds, family offices, pensions, endowments and foundations, and financial institutions.
Since its inception in October, the fund has allocated approximately $650 million of capital across four investments: Azul Brazilian Airlines, LATAM Airlines Group, Mystic Invest Holdings and Hertz Global Holdings, Inc.1 The fund’s Investment Committee consists of Greg O’Hara, Colin Farmer and Jeff Nedelman from Certares and Tom Wagner, Ara Cohen and Andrew Shannahan from Knighthead.
As the pandemic recedes, Knighthead co-founder Tom Wagner expressed optimism there is a long tail of opportunities in the private market that seek capital after a year of severely reduced travel volumes.
Also seeing opportunities in the distressed sector, Electra America and AKA announced in February they were partnering to launch the Electra America Hospitality Group with the aim of raising $500 million to acquire independent hotels in major gateway markets.
In general, distress assets have been slow to come to market, with the relative exception of hotels.
Last month, for example, JLL was retained by a CMBS special servicer to market the sale of an $80 million, non-performing loan portfolio that includes six loans collateralized by full limited-service hotels totaling 1,022 keys across five states.
In unveiling the deal, JLL managing director Tom Hall said he was expecting a strong turnout for the offering given the pent-up demand and lack of hospitality product.
More notably, Hospitality Investors Trust has filed for Chapter 11 bankruptcy this week. It has arranged a restructuring plan with Brookfield Asset Management, allowing it to take over.