Developer The Georgetown Company and hotel management and development firm First Hospitality are launching a new fund aimed at seeking $1 billion of investment in upscale and luxury hospitality properties nationwide over the next few years.
The joint venture is part of a broader strategic goal to invest in undervalued properties in an industry that's starting to rebound from the pandemic. Georgetown, based in New York, is also taking an ownership stake in Chicago-based First Hospitality in a move to align ownership and operations into a single investment vehicle.
With the launch of the fund, Georgetown seeks to reinvigorate an effort it began in February 2020 just before the pandemic's outbreak in the United States. It was then that Adam Flatto, CEO of Georgetown, hired Michael Fishbin as managing director and head of hospitality to expand the company’s hotel development and acquisition portfolio. Fishbin had been the global and Americas hospitality leader for more than 12 years at EY, the accounting firm formerly known as Ernst & Young.
“With Michael, we intended to grow our hotel exposure in a sort of organic way,” Flatto told CoStar in an interview. “When COVID happened, Michael and I determined that it would make sense to expand into that area in a broader and deeper way. ... Our ability to source and execute hotel transactions we felt would be very much enhanced if we found an operating company to partner up with to help us with details critical to underwriting and sourcing.”
Fishbin said he led the effort that matched Georgetown up with First Hospitality, drawn by the firm's strategy.
“What attracted us to First Hospitality is that at the moment, they are involved in about 50 hotels around the country. They are involved in investments in about half and third-party manage the other half,” Fishbin told CoStar. “In 2019, they had undertaken a pretty active strategy on their own to invest in their people, their technology and their processes and position themselves for growth.”
The hospitality industry has begun to regain some business lost during the pandemic, Fishbin said.
He noted the sale this week by Blackstone Real Estate Partners of The Cosmopolitan of Las Vegas for $5.65 billion to single-family office organization Cherng Family Trust, alternative investing firm Stonepeak Partners, and Blackstone Real Estate Investment Trust. MGM Resorts International plans to take over operations of the casino resort in a $1.625 billion deal.
Fishbin said Georgetown and First Hospitality are willing to investing now, knowing the industry may take some time to recover.
“We are looking at a longer recovery curve — broadly, three to four years around the country. The upscale to luxury [sector] provides positioning, in terms of chain scale, and it also works well with our longer-term investment horizon,” he said.
The firms have concluded there is significant long-term growth potential for the industry moving into 2022 and beyond.
“We believe strongly in the long-term outlook for high-quality lodging assets, and Georgetown is an agile and highly successful investor who shares our values and strategic investment goals,” David Duncan, president and CEO of First Hospitality, said in a statement.
The new fund is led by Duncan and Fishbin. First Hospitality plans to continue to expand its third-party management business.