Mumbai: CG Hotels & Resorts, a part of the Kathmandu-based Chaudhary Group, is setting up three separate property funds to buy hotel assets as part of its expansion plan to double its hospitality portfolio, a top company executive said.
While the size of the first fund, focused on acquiring distressed hotel assets in India and South-East Asia, would be around $300 million, the second one would be for €250 million and would look at buying hotels in Europe.
Both these funds are expected to raise capital in the next three months. However, the third fund, which would be focused on the Middle East and African region, is still at the planning stage, said Rahul Chaudhary, executive director, Chaudhary Group in an interview.
“We have taken a conscious decision that we would like to grow through funds. We are setting up three separate funds that would be focused on acquiring hotel assets in different regions. We expect to deploy them in the next two-three years," said Chaudhary over the phone. The company expects to buy around 20 hotel properties particularly in the four-star to five-star categories through these funds, he adds.
The group, which sells Wai Wai instant noodle brand, operates and manages around 90 hotel assets with around 5,000 rooms in 60 cities across the world under CG Hotels & Resorts. The company also has joint venture partnerships with the Taj Group, that jointly operates over 10 hotel properties in India, Nepal, Sri Lanka and the UAE. Some of the group’s other interest include real estate, banking, education, consumer electronics, telecom among others. It runs 122 companies across 30 countries.
Chaudhary said the group is on an aggressive path to double its portfolio to around 200 hotels by 2020. “So far we have only invested our own money. We are looking at doing these fund structure for the first time. The biggest idea of getting into this route is that it allows us to exit after a span of 5-7 years and you make the best of out of the capital gains," he said.
The company would manage and act an anchor investor in all these funds, putting around 20% of the total capital in each. Rest of the funds would be raised mainly through institutional investors, private equity firms and high net-worth individuals (HNIs).
“The valuation of our hospitality business is close to half a billion dollars. Year-on-year- our revenue is growing 15-20%. We intend to keep that momentum and once we reach 2020, that number is going to increase substantially," Chaudhary said.
The last two years have seen property developers and private equity (PE) funds slowly returning to the hospitality sector as hotel occupancy improved.
According to JLL’s Hotel Investment Outlook 2017, hotel real estate transactions across the global is expected to touch around $60 billion, mirroring the level recorded in 2016. In India, this year saw some big deals in the hotel space, including acquisition of a majority stake in domestic hotel management company, Sarovar Hotels, by The Louvre Hotel Group (part of Jin Jiang International Holdings).
According to JLL’s hospitality report (for India market) released earlier this year, around 70 to 80 hotel assets across India are available for transactions. The report said that investors are looking at opportunities to acquire suitable operating assets in key markets at discounted prices to drive adequate returns on investment as the industry goes through its performance upcycle and as the global economy improves.