Vukota Capital Management, and Sora Capital co-invest MXN $4.21 billion, in a U.S. hotel chain.
In search of defensive alternative investment opportunities abroad, dozens of mexican investors invested US$215.5 million in the acquisition of 45 economic hotels in the United States, through a transaction led by VCM (Vukota Capital Management), Global Asset Management, and Sora Capital.
Mexican institutional investors, family offices, and high net worth individuals (HNWI) participated in the historic acquisition of the Lodging Enterprises hotel chain, which has the Wyndham Hotels & Resorts brand in the United States, and offers cheap lodging, mainly for railroads, and civil construction workers.
American Hotel Income Properties (AHIP) sold the hotels to focus on premium brand hotels.
For Mexican investors, the transaction represents a low-risk alternative investment in the United States, offering highly defensive real assets, in a niche market with strong cash flow generation.
In addition to this, the business, which has ample opportunity to grow organically, and the opportunity to make acquisitions, also offers resilience in a possible economic recession, as its rooms are rented largely through long-term contracts with all major railroad companies in the U.S., whether the accommodation is used or not.
"In the current macro and geopolitical environment, mexican investors want to diversify into other hard currencies, particularly the U.S. dollar, and find low-risk alternative investments with real assets that provide strong cash flow, and growth opportunities”, said Pablo Buch, founder and CEO of Sora Capital, based in Mexico City.
"Mexican investors seeking diversification, felt confident in the agreement, as well as in the structure of the transaction, the way it adds value, and has much opportunity for the rise. It was our first investment in the United States and we hope there will be more agreements in the future", said Buch.
The agreement was quickly executed in just five months thanks to transparency, organization and easy access to information. For VCM, the private equity deal fits perfectly with its primary focus on defensive investments in real assets, especially real estate.
"This transaction says a lot about how we approach investments, how we co-invest and put our own money into the same investments, and on the same terms as our families", said Tom A. Vukota, founder of VCM.
"Hotels have a proven track record, enjoy ample room for optimization, and offer stable returns, mitigating market risk through long-term contracts with railway companies that need accommodation for their workers”, Vukota said. In fact, the group has already identified eight or more other hotels that could fit into Lodging Enterprises, current portfolio of 45 hotels across 26 states in the United States.
VCM is also looking for more opportunities in Latin America after partnering with Sora in the transaction.
"Defensive investments in real assets represent excellent opportunities for traditionally conservative Latin American investors. We were positively surprised by the number of investors who want to diversify abroad, and we can expect to do more in the region in the future", said Santiago Tello, Managing Partne,r and Portfolio Manager of VCM.
VCM has been investing in private equity real estate transactions, with an outstanding track record since 2010. Its TIR annualized net since the beginning of real estate transactions is 35%.
During this transaction, it managed to close some other acquisitions, and it has a very healthy portfolio for the coming months, with at least three transactions expected in the next 2/3 months in the US.
The last announced transaction is expected to close in December. It now manages over 4,000 apartment units in the U.S. in addition to this transaction, and the medical office buildings they own.