Choice Hotels International Inc. entered into a letter of intent with an affiliate of Oz Real Estate, the real estate platform of hedge fund Oz Management that's also known as Och-Ziff Capital Management Group, to accelerate development of Cambria Hotels across the United States.
Choice Hotels is in the process of identifying sites in key locations, as well as developers and management companies to build and operate these hotels, in anticipation of entering into a definitive agreement.
Cambria Hotels has almost 120 properties open or in the pipeline, and the brand is expecting to set a company record for openings for the second straight year. Hotels have opened in several major markets this year, including Charleston, South Carolina; Nashville, Tennessee; Phoenix, and Philadelphia. Future openings are planned in Austin, Texas; Baltimore; Boston; Houston; Miami; Milwaukee; Minneapolis; Orlando, Florida; San Francisco; and Washington, DC.
"We are attracting some of the largest institutional real estate investment groups in the world. The LOI with Oz Real Estate signals our companies' commitment to the brand through a contemplated 50-50 joint venture agreement that could result in building as many as 50 Cambria Hotels in strong corporate travel markets," David Pepper, chief development officer, Choice Hotels, said in a statement.
To help support this planned joint venture and other growth opportunities for Cambria Hotels, the Choice Hotels board has authorized an additional $250 million in capital investment.
Oz Real Estate invests in both opportunistic real estate private equity and real estate credit in the United States and Europe. Oz Real Estate has raised about $3.8 billion of dedicated real estate capital and completed more than 108 transactions across 19 diverse real estate asset classes as of June 30, 2018.
Hotel and gaming properties are its preferred investment, making up about 35 percent of its historical allocations. The next closest property category was senior housing at 8 percent.
"The hotel industry is growing rapidly and travel in the U.S. continues to break records. Choice Hotels is a major participant in that growth, and the Cambria Hotels brand has been a proven performer - that's why we entered into this LOI," Steven Orbuch, president of Oz Real Estate, said in a statement.
Oz Real Estate is making opportunistic investments from the Och-Ziff Real Estate Fund III, which has total equity commitments of $1.5 billion. The fund produced a 38.2 percent return in 2017, according to the Sacramento County Employees' Retirement System, an investor in the fund. The fund's investment period runs through 2019.