REAL ESTATE - The Illinois State Board of Investment has decided to allocate $30m to the RLJ Lodging Fund II – the scheme’s first investment in hotels in several years.
Joy Winterfield, portfolio manager for real estate said: “We do believe in the future of this property type.”
Illinois State took this investment action at its August 11 board meeting, assisted by its real estate consultant Townsend.
Townsend principal Rob Kochis said: “We are strong believers in the hotel recovery. The operating income coming out of hotels is solid right now.
“The growth of building new hotels is under control for the time being. There is more business and leisure travel happening around the country.”
He thinks that one of the main benefits to the RLJ Lodging Fund II is that such a large part of the fund is pre-specified. Kochis said, “This gives each investor in the fund the chance to ride the hotel recovery wave from day one. It’s not going to take the manager a long time to find all of the assets for this fund.”
There will be 100 hotels that will be acquired by the fund by year-end. The total purchase price is $1.7bn. This will represent 91% of the commingled fund’s assets. The kind of hotels in the fund are just under the luxury segment of the marketplace. They are spread out across the country. New York and Illinois are two areas where there is a heavy concentration.
Investors in the fund are projected to achieve a gross IRR of the neighborhood of 17%. The manager of the commingled fund is RLJ Capital Partners.
The investment by Illinois State falls in line with its goal of having 5% of its real estate assets owner or controlled by minority or women owned managers. Robert L. Johnson is an African-American and founder of RLJ Capital Partners.