Colony Capital has paid a reported $35m for a minority stake in boutique hotel group SBE, in a move that further underpins the reputation of so-called lifestyle hotels as a credible investment opportunity.
The deal will see Colony Capital use what SBE chairman and CEO Sam Nazarian described as its "unrivalled investment savvy" to grow the group's collection of hotel, restaurant and nightlife brands into new markets, focusing first on the eastern US and Europe.
Thomas J. Barrack, Jr, Colony's founder, chairman and CEO, returned the compliment, commenting: "Sam has harnessed his vision and uncanny instincts to create the most relevant emerging hospitality management company in the industry today.
"Having established a thriving platform of hotel and food and beverage assets, now is the optimal time to grow SBE's reach and portfolio of brands."
Under the terms of the deal Barrack and principal Richard Nanula will sit on SBE's board of directors in key advisory positions. Colony Capital is focused primarily on debt and equity investments in real estate-related assets and operating companies and has invested $45bn in over 13,000 assets through various corporate, portfolio and property transactions.
For SBE, the deal not only means funding for its expansion plans but, according to an interview with Nazarian on Bloomberg, could see the group float at some point within the next four to five years.
SBE, which currently has an estate of nine restaurants and five hotels, is hoping to build its SLS brand into a a chain of high-end boutique hotels, with its Redbury extended stay brand also ripe for growth. The first deal for the new pairing is likely to be a hotel development site in Manhattan within the next two to three months.
For Colony, which includes investments in Fairmont Raffles Hotels International, Accor, and Kerzner International, the move gives it access to the boutique sector at a time when others, such as the nascent Virgin Hotels group, are looking to make their mark.
The group specialises in distress, with Barrack commenting: "Our intent is to be a large capital facilitator to enable SBE to embark on a shopping spree through the rubble and wreckage of a stretched industry, and do those bold things that others would not consider."
It is hoped that Nazarian's group, which is built on his expertise at creating hip, trendy nightclubs (one of which is called, fittingly, Colony) can attract its clientele – and those aspiring to be them – to a similar hotel product, bringing the kind of buzz that a boutique brand needs as much as it needs distinctive furnishings and a fondness for unusual taglines.