Pygmalion Capital, a dedicated special situations European hotel investment specialist, has announced the first close for Pygmalion European Opportunistic Hotel Fund II (PEOH II).
Backed by a European private bank and a European pension fund, capital coming into the fund’s first close is already earmarked towards the acquisition of seed assets located in Italy, the UK and Ireland, that are under exclusivity, the firm said.
The fund’s objective is to build a diversified portfolio of approximately 20 special situations investments in 3-5 star hotels across Western Europe’s business and leisure destinations.
The investment strategy seeks to source and unlock value from both systemic and tactical Covid-19 triggered opportunities; these typically include undervalued, illiquid, distressed or complex situations offering both a discount at acquisition as well as value management creation opportunities.
Former Goldman Sachs banker Christophe Beauvilain, founder and managing partner of Pygmalion Capital Advisers said: 'We are excited about the early first close of PEOH II and its attractive initial investments expected to close in Q1 2021.
'The current market disruption caused by Covid-19 has led to what we view as the best investment period ever to invest in the European hotel sector. Given the size of the opportunity and the need for speed of execution, we are expanding our investment team in London as well as our in-country asset management teams.'
The first close comes just six months after the fund's marketing launch with the assistance of PJT Park Hill, comprising institutional investors. The fund's focus is on opportunistic European real estate hotel investments expected to deliver a net annualised IRR of over 15% and a maximum leverage of 60% loan-to-value.
The firm said that strong investor appetite for the strategy was likely to enable a second close at the end of March. Given the opportunities to capture temporary valuation weakness in the European hotel sector over the next 18 months, PEOH II further anticipates a final close toward the end of 2021.
PEOH II is structured as a closed-end limited partnership (SCSp) domiciled in Luxembourg with a 5 to 7 year life. It is targeting an unleveraged equity volume of over €400 mln.
