Real estate investment company DoveHill has reported a successful exit from its preferred equity investment in the US-based Courtyard New York Manhattan Chelsea hotel, resulting in an 18.4% internal rate of return (IRR) over four years.
This exit demonstrates DoveHill’s strategic investment approach during the Covid-19 pandemic. In 2020, the company provided the necessary preferred equity capital to address the property’s immediate financial needs.
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This included covering operating shortfalls, maintaining loan reserves, and ensuring adequate working capital.
The investment was made at a last-dollar basis of around $229,000 per key, which was below the market trades and replacement costs in New York City, reflecting the company’s commitment to value creation and risk mitigation.
DoveHill’s investment strategy is underscored by its disciplined approach to securing off-market deals and creating asymmetric returns.
The company’s Sponsor Fund I was established during the pandemic to capitalise on distressed opportunities in the hospitality industry, offering preferred equity capital at compelling valuations.
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By GlobalDataAs a result of its success of the initial fund, DoveHill is now raising DoveHill Opportunity Fund 2.
DoveHill founder and CEO Jake Wurzak said: “We strategically deployed capital at a critical moment during the pandemic, leveraging our expertise and deep understanding of hospitality market cycles.
“This exit underscores our capability to identify, structure, and execute preferred equity investments with substantial upside while carefully managing risk exposure.”
The new fund aims to continue investing in preferred equity within the hospitality sector and to acquire direct equity stakes in unique experiential and lifestyle-centric hotels.
DoveHillchief investment officer Charles Paloux said: “The successful exit of our preferred equity investment in the Courtyard New York Manhattan Chelsea validated our investment thesis.
“Through our new vehicle, DoveHill Opportunity Fund 2, we continue to be focused on hospitality preferred equity opportunities across the US.”
