Electra America, AKA Launch Distressed Hotel Fund

Larry Korman and Joe Lubeck (iStock)

A multifamily investment firm and a luxury hotel residences company have partnered to launch a $500 million hotel investment fund, seeking to take advantage of opportunities created by the pandemic.

Electra America Hospitality Group, a joint venture between Electra America and AKA, plans to focus on properties in New York City, Miami, Los Angeles, Washington D.C., Toronto and London, said Russ Urban, CEO of the new partnership. The joint venture recently closed on $100 million in capital.

“Anybody that’s selling a hotel in this environment today clearly is doing it for strategic liquidity issues,” Urban said. “But I wouldn’t say all of our sellers are distressed.”

Urban said the cities that the fund is targeting are “the deepest and [most] diverse markets” where it can take advantage of some level of distress and where the fund feels confident the market will return to pre-pandemic levels.

The group will target hotels with 150 to 300 rooms that are independently run and managed, and will continue to operate the properties as hotels. It’s in the market for properties that cater to business and leisure travelers.

The group currently has three deals in the works, and plans to purchase hotels ranging from just under $20 million to nearly $100 million, with a total of about 10 to 15 hotels.

The hospitality industry was among the hardest hit during the pandemic. Owners across the country have struggled to survive, with some losing their hotels via foreclosure or handing the keys back to their lenders, and others selling at deep discounts.

On an earnings call this week, Starwood Property Trust Chairman and CEO Barry Sternlicht predicted that big-box hotels won’t return to normal occupancy levels until 2024 or 2025.

Urban expects leisure travel will return to pre-pandemic levels in 2022, and corporate travel fully rebounding a year later. He believes group bookings will take the longest to recover.

“There’s no doubt that the markets are all going to come back at slightly different paces,” he said.

Electra America, a partnership between the Lubeck family and a subsidiary of Israeli company Electra Real Estate, has more than $6 billion in commercial real estate and debt holdings in its portfolio.

AKA is a division of Korman Communities, a Pennsylvania-based investment firm. The company focuses on luxury extended-stay hotel residential properties. Several of the New York City hotels that the firm partnered on with Prodigy Network have closed or faced foreclosure as part of the broader collapse of the real estate crowdfunding network.

A number of funds have launched over the past year. Alex Rodriguez’s A-Rod Corp and joint venture partner Adi Chugh of Maverick Commercial Properties recently joined CGI Merchant Group’s $650 million Hospitality Opportunity Fund.

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