HEI Hospitality Raises $275 Million in Equity to Acquire Hotels; Fund Over-Subscribed, Expects to Acquire up to $800 Million in Hotels

NORWALK, Conn.–(BUSINESS WIRE)–June 1, 2004–HEI Hospitality, a privately held hotel investment company, today announced the closing of a $275 million discretionary equity fund that will make lodging-related investments with a focus on acquiring first-class, full-service hotels in the U.S. Morgan Stanley served as placement agent for the fund.
Participants in the fund, called HEI Hospitality Fund, include institutional investors, individuals, along with a significant investment from the principals and employees of HEI. Merritt Hospitality, a wholly owned subsidiary of HEI, will be the preferred operator of the hotels acquired by the fund. However, under certain circumstances, the fund may acquire hotels managed by other operating companies.
“Our original equity target was $250 million,” said Gary Mendell, HEI chairman and CEO. “We believe the 10 percent over-subscription is a good barometer of the interest that investors have at this stage of the economic cycle in acquiring quality hotels that are operated by experienced professionals. This equity, prudently leveraged, will give us the financial strength and flexibility to acquire up to approximately $800 million in hotels over the next 24 to 36 months. HEI seeks to acquire hotels with 200 to 500 rooms in the top 50 U.S. markets.
“We will concentrate on existing, well-located, institutional quality properties,” said Stephen Mendell, HEI executive vice president of acquisitions and development. “We will look at new construction on a very selective basis. Our focus will be on franchising with the internationally recognized premium brands.”
Clark Hanrattie, HEI senior vice president and chief investment officer, noted that the company’s initial investments have achieved strong results to date. “We have acquired more than $500 million in hotel assets in the past 20 months,” he noted. “We were one of the first to announce significant plans to acquire hotels in anticipation of the recovery of the hotel industry and therefore got an early start. Our timing has been fortunate, and we believe that the window of opportunity for acquisitions that match our investment profile will remain open for the next several years.”
HEI Hospitality, headquartered in Norwalk, Conn., is a hotel investment firm that currently owns 19 first-class, full-service hotels throughout the United States under such well-known brand names as Westin, Marriott, Sheraton, and Hilton. Merritt is an independent hotel management company and a wholly owned subsidiary of HEI Hospitality.