Choice, Och-Ziff To Grow Extended-Stay Brands
By Jeff Weinstein, Editor in Chief -- Hotels, 11/30/2008 11:00:00 PM
Choice Hotels International and investment funds affiliated with New York-based Och-Ziff Real Estate Acquisitions LP have formed a joint venture to provide majority equity to developers interested in building any of Choice's three extended-stay brands.
The JV applies to developments of Choice's Cambria Suites—and, to a lesser extent, the MainStay Suites and Suburban Extended Stay brands—within North America. Specifically, Choice and Och-Ziff are seeking institutional-quality developers who want to open multiple Cambria properties in major U.S. urban markets, including Chicago, Los Angeles, San Francisco, Philadelphia, Phoenix and Washington, D.C.
“Our focus is to work with proven and established partners on promising real estate development projects worldwide, and our joint venture with Choice is very much in line with that strategy,” says Steven Orbuch, president of Och-Ziff Real Estate Acquisitions, in a statement. “We believe that Cambria Suites, in particular, is poised to be a leader in the upscale, select-service segment.” Och-Ziff Real Estate Acquisitions is an affiliate of Och-Ziff Capital Management Group, a global firm with more than US$33 billion of assets under its management.
Along with the capital infusion by Och-Ziff, Choice will be contributing sliver equity to each project.
The JV was announced in August, before the collapse of the credit markets, and the grim financial outlook is a setback to the JV in the short term, says David Pepper, Choice's senior vice president for franchise development and president of upscale and extended brands. “The current credit market situation has certainly impacted the ability to finance Cambria Suites hotels in major markets,” Pepper says. “It is challenging to obtain first mortgage financing. The larger the project, the more difficult it is to get financed.”
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Nevertheless, Choice remains optimistic about the long-term prospects of its newest brand and the others involved with the Och-Ziff JV. “The Cambria Suites brand should fare comparatively well in this downturn, as our hotels have been enthusiastically received by consumers,” Pepper says. “Extended-stay hotels, such MainStay Suites and Suburban, have historically achieved occupancy premiums during economic and industry downturns.”
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