Mumbai: Istithmar, the Dubai government-controlled $2 billion (Rs8,600 crore) private equity fund, plans to partner the Tata-controlled Indian Hotels Company Ltd, owner of the Taj group of hotels, for overseas acquisitions.
Both Istithmar Hotels, a subsidiary of the Dubai-based Istithmar, and the Taj group have been aggressively scouting for acquisitions of marquee luxury hotels worldwide.
“We believe the Indian Hotels Company’s strategy of acquiring luxury hotels in key destinations overseas which serve as gateway cities for business travellers is a well-thought out plan. We have talked to them about projects in the past and will look at working together in the future with them as well as Jumeirah International for global acquisitions,” says Joe Sita, chief executive officer of Istithmar Hotels.
Istithmar Hotels holds a 22% stake in Kerzner International, the luxury hotel chain that owns the One and Only brand. The arm of the Dubai private equity group also holds a strategic stake in Malta-based International Hotel Investments that owns another chain of luxury hotels. The firm bought the landmark W luxury hotel in New York for $285 million in October 2006 and also the Knickerbocker Hotel in New York’s Times Square and the Hotel Washington on Pennsylvania Avenue.
Indian Hotels Company has made three large overseas acquisitions since 2005. These included a $26 million purchase of a Stanwood group hotel in Sydney and a $170 million purchase of the Ritz-Carlton in Boston, US.
In its latest deal announced on 3 April, the company has floated a 100% US subsidiary to acquire Hotel Campton Place, San Francisco for $60 million in partnership with financial investors.
Hotel Campton Place, a 110-room luxury boutique hotel situated in Union Square in the heart of San Francisco, is the first overseas acquisition where the Tata group company is buying a hotel in partnership with other investors. R.K. Krishna Kumar, vice-chairman, Indian Hotels, said in a statement, “North America is a very important source market for our hotels across the globe. San Francisco is one of the top five markets in the US and has a unique connect with India, especially in the technology industries, thus offering a considerable potential for business. New York, Boston and San Francisco provide access to a strategic network of key source markets, not only for our US operations but also for our properties in India.”
Sita says his company is not looking at co-investing with Indian Hotels in this acquisition. “We may look at getting the Taj group to manage some of the properties that we may acquire,” he says.
Istithmar is seeking partners in India for its easy hotel budget hotel chain.
These could be older city centre hotels needing refurbishment or partners with land in tier II or tier III cities. “We are primarily looking for a real-estate partner who is into developing malls or IT parks or even a hotel chain that shares our vision of budget hotels for our India foray,” says Sita.
For its entry into the Indian budget hotels segment, Istithmar, the single-largest financial investor in low-fare carrier SpiceJet, will look at synergising with SpiceJetHotels as well. “We have located sites in India for our budget hotels foray in the tier I cities. But we need more sites at reasonable prices which a joint venture with a developer can get us,” says Binod Narasimhan, chief financial officer, Istithmar Hotels. “We wouldn’t mind having a loss leader in a city center to begin with for our budget hotels foray in India if that gets us some brand visibility,” he adds.