Rescue Capital Targets Hotel Owners
CHARLESTON, S.C. / BOCA RATON, FL. –September 26, 2023
TMGOC Ventures has launched a program that provides res- cue capital to hotel owners struggling with increasing borrow- ing, construction and operating costs.
The hotel investment shop is planning an initial investment of $50 million to $75 million, with capital coming from internal resources and a handful of partners. The initiative aims to pro- duce value-added returns by offering preferred equity in incre- ments of $5 million to $15 million.
In keeping with TMGOC’s broader lodging-sector focus, the program will target hotel owners, though it may take on select investments in other asset classes as well.
Overall, the hotel sector has been on an upward trajectory as demand from the corporate, group, international-travel and other segments regains momentum. But some owners, particu- larly those with maturing loans, still could face a cash crunch as the cost and availability of debt have made refinancing more challenging.
In addition, higher material and labor expenses have in- creased the cost of construction and renovation projects. At the same time, some hotel owners are facing pressure from their brand partners to move forward with improvements that had been delayed during the pandemic. Other rising expenses, such as insurance premiums for hotels in hurricane-prone areas, also can factor into the need for more equity.
“As hotel owners and developers ourselves, we can understand … the risk and opportunities when addressing some of these challenges,” said Krystal England, who signed on as chief investment officer at TMGOC in June. “That gives us the ability to meet owners where they are … and properly structure the capital.”
The program’s ability to target smaller check sizes, England added, allows it to reach an underserved segment of the mar- ket. “One of the benefits of our structure is flexibility in how we size and structure these investments,” she said.
TMGOC has some $1 billion of properties owned or under
development, mainly in the hotel sector. The firm was founded by industry veterans Sunju Patel and Glenn Alba as a joint ven- ture between Charleston, S.C.-based Montford Group and Op- terra Capital of Boca Raton, Fla.