MIAMI—Driftwood Capital, a privately held real estate firm specializing in hospitality investments, has launched fundraising for its new Mezzanine Lending Fund. The firm intends to raise $100 million from investors to source mezzanine loan and preferred equity transactions in the hospitality sector. The fund will originate loans and preferred equity positions in the $3 million to $50 million range.
“This fund will provide a much-needed source of capital to hotel owners and lenders struggling to regain their footing in the aftermath of COVID-19 ,” explained Chairman & CEO Carlos J. Rodriguez Sr. “At the same time, it gives our high-net-worth investors an unprecedented opportunity to achieve risk-adjusted returns by investing in high quality, franchised and select independent boutique hotels and resorts throughout the United States.”
Driftwood Capital’s syndication model allows accredited investors to co-invest in institutional-quality hotel assets or capital solutions at an attractive basis, according to the company. Earlier this year, Driftwood Capital launched two new funds—each, respectively, focused on hospitality development and acquisitions of existing hotels—and had raised a combined $250 million in those vehicles. These prior funds target deals with a hotel component across the U.S. in the $30 million to $150 million range.
The principals of Driftwood Capital have a 30-year track record transacting on more than $5 billion in hospitality assets through various affiliated management and ownership entities.
“Many senior lenders have approached us to participate with them in lending to hotel projects since they value our expertise in the hotel industry and feel more comfortable lending to third parties with us being part of the capital stack,” said David Steiner, the new lending fund’s managing director. “We invest in all levels of the capital stack, and with our proven track record and expertise in the hospitality space we will be a compelling capital source in the hotel subordinate debt market.”
Since 2015, the principals of Driftwood Capital have placed more than $650 million in capital with their investor network of family offices, high-net-worth individuals, and others, representing a portfolio of more than $1 billion in hospitality assets. Among these assets are the Marriott Mission Valley San Diego, the Sheraton Park City, and the Margaritaville Lake of the Ozarks, as well as the newly opened Canopy by Hilton West Palm Beach & Canopy by Hilton Tempe.