MHI Hospitality Corporation (AMEX: MDH) has announced that it has entered into a joint venture with The Carlyle Group to source, underwrite, acquire, develop and operate targeted substantial hotel assets and/or hotel portfolios.
Carlyle has committed up to $100 million (approx. €68 mln) of equity capital to the joint venture, which allows for individual transactions to exceed $30 million (approx. €21 mln). Washington, DC-based Perseus Realty Capital acted as agent and arranger of the venture.
Andrew M. Sims, President and Chief Executive Officer of MHI Hospitality Corporation, commented, "We are very pleased to announce this joint venture with Carlyle. The venture enhances our ability to invest in larger hotel assets and portfolios and will facilitate further growth of our real estate platform. We believe this venture is consistent with our core strategy and presents an additional means for us to create significant long-term value for our shareholders. We look forward to a productive partnership with Carlyle, an established firm with a stellar investment track record."
Robert G. Stuckey, Managing Director of The Carlyle Group and head of Carlyle Realty Partners, said, "We are excited to partner with a group as experienced and dedicated as MHI Hospitality Corporation. MHI has a proven track record of successful hotel investing, which will only be enhanced by our partnership."
Hayden R. Jones, Principal of The Carlyle Group said, "We thank Perseus Realty Capital for introducing us to MHI. One of our main goals is to partner with proven real estate investors and property managers to create value for our investors."
Under the agreement, MHI will identify potential investment opportunities in excess of $30 million and the joint venture partners will jointly agree on an investment's suitability prior to capital commitment. Carlyle's flagship U.S. real estate fund, Carlyle Realty Partners V (CRP V), will commit up to $100 million of equity capital to the joint venture for a 36-month term. CRP V will fund up to 90% of the equity of an acquisition and MHI will provide between 10% and 25%.
It is expected that hotels acquired by the joint venture will be managed by MHI Hotels Services, L.L.C., and MHI will be paid an asset management fee of 1.5% of the gross revenues of the hotels owned by the venture. In addition, MHI will have a first right of offer with respect to any investment within the joint venture.