The News: Catching a Falling Star

Some hotel investors might see deteriorating hotel occupancy and rates as a reason to pull back, but one recently launched hotel investment group, Fairwood Capital L.L.C., is capitalized with $150 million in equity to buy hotels.The principals are hospitality and real estate veterans: Robert Solmson is the former chairman & CEO of RFS Hotel Investors Inc., a publicly traded hotel REIT. Ed Ansbro was senior vice president of Equity Inns Inc., another publicly traded REIT that was sold to Whitehall Street Global Real Estate L.P. in 2007. And Richard Reiss is chairman of Georgica Advisors L.L.C. and other private investment entities.Solmson had been keeping a close watch on the industry since RFS Hotel was sold to CNL Hospitality Properties for $700 million in 2003. He believed that the market had become frothy in 2006 and 2007 and saw the industry as heading for a likely downturn. “He wanted to find a capital source he could align with,” Ansbro said. The fund, assuming leverage of 50 percent, will have as much as $300 million to invest, which should be deployed over the next years, he said.Fairwood will also target select-service and extended-stay hotels under Marriott, Hilton and Starwood flags and will consider full-service properties like smaller Sheratons and Westins. “We’re not going to buy battleships,” Ansbro said. The firm plans to buy assets outright, but acquiring distressed debt could be another vehicle. “We’re trying to figure out the soft spots,” he said. The fund will look for acquisition in the top 50 U.S. cities and likes state capitals, as well as those near state universities.Tough Fairwood believes that hotels are a solid long-term investment, the short-term challenges are evident, Ansbro said, predicting that the industry will have a tough first six months in 2009 and begin to improve in the second half.