SA’s Stonewood Alchemy grows US hotel portfolio
SA commercial property investors have traditionally not been active in the US, the world’s largest market, but initial success achieved by Emira Property Fund there has started to inspire others.
SA firms had avoided the US in the past due to numerous challenges including time-zone differences, having insufficient capital to make significant investments and a lack of market knowledge. But recently they have started investing in partnership with US firms in specialised real estate markets.
One of the SA companies that believes it can succeed in the US is privately owned property investment and development company Stonewood Alchemy Real Estate, which is growing its portfolio in the US.
In a $85m deal, the group led by director Eldon Beinart, its US partner EastSide Investment Partners, and SA investors bought 16 extended-stay-style hotels in Texas and Oklahoma in 2018 under the Extended Stay America brand.
Part of the deal includes the rights to develop five other hotels into long-stay accommodation. This is the largest SA-led investment in the US hotel industry yet. Stonewood has said it plans to convert five more distressed hotels into long-stay accommodation over the next year and a half. Its first conversion is located in Houston, and future conversions will take place in Houston, Dallas and Oklahoma City.
“We are very excited,” said Beinart. “Soon we will own 21 hotels in the economy sector of the extended-stay segment, which we believe will continue to perform well despite the inevitable slowdown on the horizon in the US.”
Guests can to stay for up to two years at long-stay hotels in the US, he said.
Stonewood was founded in Guernsey in 2011 to provide global investment opportunities, services and support to family offices and high net-worth investors. Stonewood and EastSide already have investments in the assisted-living and postacute health-care, memorycare sectors in the US.
“Our strategy has been to invest in properties in various countries, add value to them and then sell them on, often to real estate investment trusts,” Beinart said. “The extended-stay hospitality sector has also performed favourably against the traditional rental market, platform services such as Airbnb and hotels.”
SECTOR DOMINANCE
Beinart said a 2018 report by research house Highland Group showed that extended-stay hotel rooms accounted for about 8.5% of the total supply of US hotel rooms at the end of 2017.
“Third-quarter 2018 figures in the report affirm the dominance of extended-stay hotels in the broader hospitality sector, as they have maintained close to record occupancy levels, despite adding more than 100,000 new rooms.
“Annual room revenues have also doubled since 2011 and the extended-stay segment consistently outperforms the overall hotel industry, led by the economy segment,” he said.
Stonewood’s investment in US real estate follows on from JSE-listed real estate investment trust (Reit) Emira, which started buying stakes in small shopping centres in 2017.
Emira and Rainier Companies now co-own six centres in Texas, Florida, Missouri, Indiana and Ohio.
Emira has invested $50.5m in the portfolio.
OUR STRATEGY HAS BEEN TO INVEST IN PROPERTIES IN VARIOUS COUNTRIES, ADD VALUE TO THEM AND THEN SELL THEM ON