UNITED STATES - Cornerstone Real Estate Advisers is getting ready to close the capital raising on its Cornerstone Hotel Income & Equity Fund II, having persuaded investors to commit $466m (€340.5m) to the fund.
The total capitalisation of the US hotels fund is likely to reach $1.3bn as the fund carries approximately 60% leverage.
The amount of capital attained does falls within the $400m-$600m range Cornerstone had hoped to raise, and was achieved in part because several pension funds placed capital in the fund.
The two largest commitments to the fund came from Wisconsin State Investment Board and Los Angeles County Employees Retirement Association at $150m each.
Cornerstone's parent company, Mass Mutual Life Insurance Company, has also invested $75m while the firm itself invested $1m of its own capital into the fund.
Investors are projected to achieve net IRRs in the range of 15-18% and investors believe now is a good time to pursue the acquisition of value-added hotels.
Pricing on the upper upscale hotel purchases targeted by the fund is likely to drop as these assets are negatively affected by the current economy, and the properties are then expected to be ready to perform better when renovation work is completed as the economy is likely to have improved.
Cornerstone has already closed the deal on the first three assets for the commingled fund - a $185m acquisition of three Monaco Hotels in Chicago, Denver and Salt Lake City which between them have a total of 606 rooms.
The properties were acquired from Pramerica Real Estate Investors and were previously held in its PRISA commingled fund, purchased by the company in 2004 for $103m.