Walton Street Capital closed a blockbuster deal yesterday: The private equity real estate investment firm JV'd with London-based Benson Elliot Capital Management to buy a prime European hotel portfolio from Host Hotels & resorts for $461M. This morning, Walton Street principal Robert Bloom (snapped with Waterton CEO David Schwartz at Bisnow Chicago's 7th Annual State of the Market) told us the deal includes 2,308 rooms in seven European markets including Paris, Venice, Rome, Milan, Warsaw, Nuremberg and Brussels. The hotels are located near city centers, vacation destinations or high-growth commercial corridors.
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Robert says Walton Street was intrigued by Europe's position in the real estate cycle, which he estimates is two to three years behind the US. This means the JV can apply a 7 to 8 cap rate on these properties in the current cycle, but finance 60% of the buy with a 2.5% interest rate. Walton Street is overhedged in the deal, and it's buffered by the portfolio's current cash flow so that any depreciation in the euro will still allow the JV to pay off its debt.
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