Banking on its more than 30 years as an investor in hotels and resorts, the LA-based investment and development firm says it is confident of finding "attractive spreads and loan-to-value levels in the hotel sector, which has generally had difficulty finding financing of late."
Lowe's hospitality capital markets and investment management business units will jointly manage the fund, which has commitments from institutions and high net-worth individuals, as well as from Lowe itself. Ron Silva, chief investment officer for the new fund and president of Lowe Hospitality Capital Markets, notes that both Wall Street and traditional lenders remain wary of hotel financing due primarily to the uncertainty of when the hospitality industry will stabilize and begin to recover. But, he says, Lowe believes now is an opportune time to invest in the subordinated debt.
The fund will focus on subordinated debt of individual hospitality properties or portfolios in major markets. Subordinated debt typically represents what lenders and investment bankers refer to as the "B piece" or the "B note." Silva says the fund will choose its investments on the basis of borrower integrity, asset quality, and market strength.
Since its inception in 1972, Lowe has invested in the hospitality sector, including the business downturn in the 1990s when it acquired hotels as direct assets on behalf of pension fund clients.
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