Kimpton Fund Plans to Invest $800M Over Next 3 Years

Kimpton Group Holding L.L.C., which raised $246 million in an institutional real estate fund, plans to acquire more than $800 million worth of hotels over the next three years.The parent company of Kimpton Hotels & Restaurants, Kimpton Group Holding said the KHP Fund II L.P., raised 50 percent more than the first KHP Fund. The KHP Fund I closed three years ago and now owns interests in 13 Kimpton properties. Kimpton’s first institutional fund was called the Kimpton Opportunity Fund. That $122 million fund acquired nine properties, seven of which have been sold. KHP Fund II will be used to acquire, develop and redevelop boutique/lifestyle hotel properties in major cities and resort areas in the United States. Two projects financed with the fund are already under way–the Hotel Palomar Philadelphia and a new Hotel Palomar in Chicago.CPN reported Jan. 15 that Kimpton had purchased the Architects Building in Philadelphia for $21 million and planned to spend about $71 million to redevelop the nearly 80-year-old Art Deco building in Rittenhouse Square into a 234-room hotel with a restaurant, boardroom, 6,000 square feet of meeting space and a 3,000-square-foot penthouse ballroom. Hotel Palomar Philadelphia is expected to open in 2009.Kimpton, which currently operates 42 upscale hotels in the United States, is the only branded boutique hotel company with institutionally funded, fully discretionary, dedicated funds for the acquisition and development of boutique hotels, according to a news release. “Our ability to raise money at this time of tightening credit within the real estate capital markets shows the increasing popularity of Kimpton style hotels and the strength of our business model,” CEO Michael Depatie noted in the release.The Wall Street Journal reported April 2 that university endowments make up much of the fund’s institutional investors.Kimpton said the KHP Fund will use several strategies for investments, including acquiring non-hotel building for adaptive reuse like the Philadelphia property. It also plans to acquire existing hotels that are similar to Kimpton’s model or can be repositioned. The third approach is new construction and the company is targeting urban and resort areas in North America. The Kimpton Web site notes there are at least seven projects in the pipeline for openings in either 2008 or 2009.  Kimpton will also be developing a 250-room Hotel Palomar in Downtown Phoenix as part of the $900 million CityScape mixed-use project, according to an Oct. 23, 2007, CPN article. The tower at One South Central, expected to open in 2009, will include the hotel as well as 600,000 square feet of office space to be anchored by Wachovia, retail and condominium units.