Stonewood Alchemy Real Estate, a privately-owned South African property investment and development company, has acquired together with its US partner and South African investors, 16 “extended stay type” American hotels in Texas and Oklahoma.
Founded in Guernsey in 2011, Stonewood provides global investment opportunities primarily to high net worth families who wished to invest alongside the company.
A director at Stonewood, Eldon Beinart said “the investment deal was worth 1.2 billion rand ($85 million), and included the rights to build five additional hotels. This transaction augments our current American portfolio, which includes investments in the post-acute healthcare, memory care and assisted living sectors”.
Beinart revealed that Stonewood’s co-investment US partner was Denver-based EastSide Investment Partners LLC. He noted their strategy was to acquire hotels that were under-performing and then add value to them.
Confirming Stonewood has a similar approach, Beinart said “our strategy has been to invest in properties in various countries, add value to them and then sell them on, often to real estate investment trusts”.
Emira Property Fund which, about a year ago, co-invested in shopping centres in Texas and Ohio, with Rainier Companies, is another South African property company that has created a similar investment partnership.
Beinart said the investment case for entry-level long stay hotels was strong, especially in Houston, Texas. He noted Houston was set to enjoy a large multibillion dollar infrastructure spend. Houston’s population, which sits around 2.3 million, is growing rapidly. Only New York, Los Angeles and Chicago have larger populations.
The 2018 Highland Group extended stay report shows that extended-stay hotel rooms accounted for about 8.5 percent of the total supply of US hotel rooms at the end of 2017.
According to the report, in what was the fastest annual increase in demand since 2005, overall extended-stay hotel demand grew 8.4 percent in 2017. Extended-stay hotels also achieved an occupancy that was 10.4 percent greater than the overall hotel industry.
Beinart said “the extended stay sub-sector of the hospitality industry is also a play on the short to medium-term accommodation sector. We believe multi-family yields in the US are at all-time low at the moment. This investment will tap into some of the key positive demographic trends supporting multi-family investments, at a very attractive entry yield”.