Benson Elliot, GEM Realty acquire hotel-backed debt

Private US real estate firms Benson Elliot Capital Management and GEM Realty Capital have joined forces to acquire an EUR 42.5mln performing mezzanine debt tranche priced at a discount to face value. The debt is secured by a portfolio of hotels and other assets located in Germany.

Benson Elliot and GEM Realty said the portfolio was majority owned by real estate managed by an affiliate of Blackstone Real Estate Partners and comprised of 10 hotels and six other assets in Germany.

In terms of value, about 50% of the portfolio is located in Berlin. The portfolio includes flagship hotels like the Westin Grand and Park Inn Alexanderplatz in Berlin and the Westin Bellevue in Dresden. The partners said the loan secured by the portfolio was performing at the time of acquisition and in line with all covenants.

GEM Realty Capital has a 15-year track record of investments in discounted and distressed debt. Benson Elliot said the investment was its first in discounted debt although it has been active in the origination, acquisition and management of both performing and non-performing loans. Benson Elliot noted that since the onset of the current wave of capital markets turbulence, it has reviewed numerous similar opportunities and expected to see more similar investment opportunities in the short-term.

'During this current liquidity crisis, we have been actively screening and analysing potential debt investments that can meet our risk/return profile,' said GEM senior managing partner Barry Malkin in a statement. 'We are optimistic about this high-yield debt investment that is secured by an excellent portfolio of assets and has a strong sponsor in Blackstone.'

Deloitte & Touche and Travers Smith advised Benson Elliot on the transaction. GEM Realty Capital was advised by Mayer Brown.