Broadshore Capital Announces 'Well-Timed' Hospitality Investment

Looking to seize on the general recovery of the hospitality industry from pandemic-fueled setbacks, Broadshore Capital Partners has formed a $150 million hospitality investment program in partnership with a global alternative investment manager. 

“[The situation] presents significant opportunities for our new hospitality investment program,” Brad Howe, CEO, Broadshore, said in prepared remarks. “[We are positioned] to capitalize on what we view as a sizable market opening.”

Broadshore will invest debt and equity through originating new high-yield financings, acquiring loans and making direct equity investments. The venture is targeting loan originations, performing and non-performing loan purchases and hotel acquisitions in the range of $10 million to $75 million.”

An ‘Incredibly Well-Timed’ Move

Kevin Davis, Americas CEO, JLL Hotels and Hospitality Group, tells GlobeSt.com that this is an “incredibly well-timed” entry into the lodging space with flexible capital that can invest throughout the capital structure. 

“The recent debt market volatility and increase in lending coupons will create interesting situational opportunities in the coming months, and this investment vehicle is ideally suited to take advantage of those opportunities,” Davis said.

Grant Puleo, a partner at Duane Morris, tells GlobeSt.com that leisure travel will likely bounce back relatively quickly and business travel will take longer. 

“Both, however, may look very different from their pre-Covid selves,” Puleo said. “There is pent up demand for leisure hotel experiences with ‘smart’ and ‘sustainable’ hotels offering unique experiences being best situated to do well in the near- and long-term future.

“Work travel, when it does come back, may look very different, with fewer large conventions and work retreats and more individual ‘workcations’ or ‘bleisure’ travel, where business travelers combine work and pleasure, again in hospitality products that are smart, sustainable and unique.”

He said that hotels that adapt to these evolving trends should do well in the near- and long-term future compared to their peers that are slow to adapt to a post-COVID world.

Hotels Well-Suited to Handle Inflation

Cadre’s Investment Specialist, David Vincent, tells GlobeSt.com that he thinks hospitality could be one of the best-positioned asset classes in commercial real estate for the current inflationary environment.

“Because hotels are able to reprice on a daily basis, hotel owners have the ability to adjust to inflation in real time,” Vincent said. “This means that hotel owners can adjust to inflation in real time.

“In our view, select service hotels should outperform full-service hotels in the near term, as the pool of labor willing to work for the offered rates is shrinking. When we look at select service hotels, we see that there are fewer amenities on offer and they require fewer staff positions. Therefore, they are less impacted by rising wages or worker shortages.”

Vincent said that currently, leisure properties are performing well, corporate centers are relatively weak, and convention center business is extremely slow. 

“While some hotels in the urban core are making up for reduced business travel with higher room rates, it still is not clear if that will provide enough support to offset the reduced demand and potential negative impact of inflation on rising costs,” Vincent said.

For Starters, Broadshore Building in Seattle

Concurrent with the completion of the joint venture, the partnership closed a $19.8 million mezzanine construction loan to RevPAR Companies for the development of a 200-key AC Hotel by Marriott at 117 Yale Avenue North in Seattle.

The new hotel in the prominent South Lake Union district is a vital business hub with Amazon, Facebook, Google and the Bill & Melinda Gates Foundation and numerous other corporations in the area.