FINANCIAL INSTITUTION Friends First is acquiring half the equity in a five-star US hotel, which was bought last year by Irish group Claret Capital for more than €110 million. Barry O'Halloran reports.
Friends First is taking 50 per cent of the equity in the Regis Hotel in Washington DC, the only five-star property in the centre of the US capital.
Claret Capital, the private investment group run by businessman Domhnal Slattery, agreed a deal to buy the hotel last September for $173 million (€110 million) from US real estate specialists, Brickman and New Valley Corporation.
Claret borrowed 78 per cent of the purchase price, and funded the remaining 22 per cent, about $45 million, from its own resources.
It has offered half this 22 per cent equity in the deal to Friends First, which intends selling shares in the property to high net worth clients for between €150,000 and €3 million.
Claret's own clients are taking the other 50 per cent of the equity. The group advises a number of wealthy individuals and families, one of whom is said to be Senator Feargal Quinn, who founded the Superquinn grocery chain.
According to Brian O'Neill, marketing director of Friends First Private Investment, the institution has an ongoing relationship with Claret Capital.
"We would have a long-standing relationship with Claret," he told The Irish Times. "They got the opportunity to acquire the property and they asked us to participate."
Mr O'Neill said that Friends First believes that the Washington Regis is largely insulated from the problems that have hit the US economy and its property market.
He pointed out that the hotel's location, and the fact that it is the only five-star property in central Washington DC, should ensure that it had a strong market.
"It is literally 300 metres from the White House," he said. "We are looking at a very high-end market, diplomatic visitors, government and business."
The Regis has been refurbished over the last year. According to Mr O'Neill, room occupancy rates were running at about 71 per cent to 72 per cent before it was redeveloped, and that has since increased to 73 per cent.
The Irish buyers intend to cash in their investment by selling the Regis in five years time. Mr O'Neill said that Friends First was offering shares to high-net worth individuals, largely those with which it has an existing relationship.
The bank recently cashed in another property investment in which a number of its private clients had invested, and expects a number of those to come on board again.
The minimum threshold for participating is €150,000, while the maximum is €3 million. Friends First will charge up-front fees of 4 per cent of the investment, and 2 per cent a year after that.
Friends First and Claret will be responsible for managing the property during the time of the investment.
At the time that Claret did the deal last September, Mr Slattery predicted that it would generate a 15 per cent return over five years.
Claret's other investments include low-cost executive jet airline, Jetbird and Irish TV station Channel Six.
Starwood Hotels originally owned the Regis, but sold it to Brickman and New Valley Corporation in 2005.
