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Business Observer Thursday, Oct. 3, 2013 5 years ago

Liberty Group changes strategy

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The hotelier is moving from debit acquisitions to a new investment fund to meet a changing hospitality market.

TAMPA — The hotel investment firm Liberty Group purchase of the 125-room Candlewood Suites in Charleston, S.C., marked two big changes for the firm. First, it signaled the company's entrance into the Charleston market. Second and more significantly, it was the first purchase through the company's new private equity fund Liberty Hospitality Fund I LLC.

Punit Shah, president and chief operating officer of Liberty Group, says his company has been working on the fund for a year and has already raised $6.5 million in capital commitments. Hitting that level allowed Liberty Group to do an initial closing, giving it access to the money needed to buy the 6-year-old hotel. The fund is asking institutions and high net-worth individuals to contribute at least a $1 million each toward the goal of a total capital raise of $25 million.

As the hotel market has steadily improved, Punit says the number of hotels that can be acquired through debit purchases has sharply declined. The company decided to create an investment fund to give it the additional capital it need to buy distressed hotels in fee-simple deeds.

“Our strategy hasn't changed,” Punit says. “The thing that has changed is the manner through which we acquire these properties. Changes like this aren't new for our company. Historically, we have always developed our properties, we only switched when we saw the opportunity to acquire non-performing mortgages. Now we're all fee-simple deeds. We go where the opportunity is.”

If the first fund proves successful, Liberty Group has plans for more in the future. For now the fund is focused on acquiring and stabilizing distressed limited- and select-service hotels in the Southeast United States.

Liberty acquired the Charleston hotel directly from the special servicer for around $6 million (a 50% discount to the original development cost). The new owner plans to to invest in renovations in early 2014. The extended-stay hotel is Liberty Group's 23rd acquisition since 2010.

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