• Kimpton demonstrates appeal

Kimpton, the US-based boutique chain, has closed its third institutional real estate fund, raising $246m which will give it $800m of firepower to spend over the next three years.

The move is a counterpoint to the gloom surrounding the economic outlook which was further downcast this week with the International Monetary Fund putting the cost of the credit crisis at almost $1,000bn.

Kimpton's success reflects in part the buoyant segment on which it is focused. It lays claim to being the only branded, boutique hotel company with institutionally funded, fully discretionary, dedicated funds for the acquisition and development of boutique hotels.

The San Francisco based company currently has 42 hotels of which 12 are owned by the previous two funds. It has a pipeline of 19 deals to add to its existing 8,200 strong room count.

CEO Michael Depatie said: "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."

Meanwhile, the 211 pages in the IMF's Global Financial Stability Report (http://www.imf.org/external/pubs/ft/gfsr/2008/01/index.htm) estimate that the loss on loans for US commercial real estate alone is of the order of $240bn, on top of the $565bn of pain suffered with residential lending.

According to the IMF, the lessons learned from the current turmoil are likely to shape structured finance decisively. "Some of the changes may be short-lived – simpler products and a more discerning investor base – and some may have more staying power, such as improved transparency and disclosure, and a better incentive structure for rating agencies," said the report in the conclusion on this topic. What is not likely is that structured finance is going to disappear.

The IMF outlined four themes in the report: the collective failure to realise the amount of leverage taken on by a wide range of institutions; risk management, disclosure , supervision and regulation all lagged innovation and shifts in business models; the transfer of risks off bank balance sheets was overestimated; and financial markets remain under considerable strain.

What was not in the report was any indication of how much longer the credit crunch is going to go on.

Perhaps the first sign of the beginning of the end – or the end of the beginning if you're a pessimist – is the purchase of bank debt by private equity funds. Citigroup is in talks to unload $12bn of loans at a loss to Apollo, Blackstone and TPG.

The logjam of unsold loans on the balance sheets of the 10 leading investment banks is estimated at around $200bn and until these are cleared, the credit crunch will continue its grip.

 

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