UNITED STATES- US pension funds are returning to the real estate investment market to plug into opportunities in the struggling upscale hotel market.

Examples of the money that pension funds are now prepared to spend in this sector can be seen in Thayer Hotel Investors V fundraising, as the Thayer Lodging Group attracted $280m (€192.2m), a substantial sum of which came from pension funds.

Texas Teachers was the lead investor for this commingled fund as it made a $100m commitment alongside other pension funds, fund of funds capital and sovereign wealth funds.

The hotels real estate market is still currently seen as being in disrepair as investors predict the revenue per available room (RevPar) will be down by 15-20% in 2009 - a far bigger drop than was anticipated at the beginning of the year when it was predicted RevPar would be 9-10%.

The expectation for 2010 is the hotels market has still to hit the bottom and the market is not really to turn until the economy starts to improve and there are signs of job growth, and this is not predicted to happen until the second half of 2010.

Investment managers, however, are taking different approach when it comes to investing capital raised for hotel funds. Thayer Lodging is now working through a pipeline of deals involving upper-upscale assets that it has been processing on for some time.

Jin Lee, chief investment officer, at Thayer, said: "We are hopeful that it won't be too long before we have the first transaction for the fund. We are looking at a variety of deals which would include straight purchases, recapitalisation and structured equity investments. We are not in a hurry as we have three years to invest the capital we just raised."

Cornerstone Real Estate Advisers is taking a different tack as it has spent much of 2009 looking for upscale deals on behalf of its investment fund, Cornerstone Hotel Income & Equity Fund II, but expects to make purchases in 2010.

Both real estate managers are looking at holding onto the hotels it invests in for the next three to seven years.

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