Flynn Properties, Värde Partners enter into $1.1B JV

Flynn Properties Inc., owner of commercial real estate, luxury resorts and select-service hotel properties in the U.S. and abroad, in a joint venture with Värde Partners, a leading global alternative investment firm, has acquired an 80% joint venture interest in 89 select-service and extended-stay hotels in a $1.1 billion implied total enterprise value transaction from affiliates of Highgate and Cerberus Capital Management.

With properties located throughout the U.S., the portfolio comprises 58 Marriott-branded hotels, 24 Hilton-branded hotels, four Radisson-branded hotels, two IHG-branded hotels and one Choice-branded hotel, which will undergo capital improvements over time. Affiliates of Highgate and Cerberus will retain a 20% interest in the investment, and Highgate will continue to manage the properties on behalf of the joint venture. This is the second joint venture between Flynn Properties and Värde Partners; last year, the partners acquired a portfolio of 20 Marriott- and Hilton-branded select-service hotels from Apple Hospitality.

“We are excited to announce the addition of these hotels to our portfolio,” said Greg Flynn, founder/chairman/CEO, Flynn Properties. “This acquisition is part of a broader business strategy of Flynn Properties to increase its limited-service hotel footprint, which has proved to be one of the best-performing sectors in the industry. We are also excited by the caliber of properties included in this deal, as the portfolio’s brands are global hospitality icons known for hosting some of the world’s most loyal travelers for business and leisure while offering exceedingly robust guest loyalty programs, which we believe will be a key source of guest revenue and retention.”

This acquisition will bring Flynn Properties’ limited-service hotel portfolio to 115 properties. Flynn Properties is a division of San Francisco-based Flynn Holdings, which has two principal businesses: real estate and restaurants. Its prior hotel investments include numerous limited-service and extended-stay hotels as well as five super-luxury resorts, Esperanza and the Chileno Bay Resort, both located in Los Cabos, Mexico; the Carneros Resort & Spa and Solage, both located in the Napa Valley, CA; and the Hotel Madeline in Telluride, CO. Its commercial investments consist primarily of tech-oriented office buildings on the West Coast which have totaled more than three million sq. ft. Its affiliate, Flynn Restaurant Group LP, is the largest franchise restaurant operator in the world and one of the 20 largest foodservice companies of any kind in the U.S., according to the company, owning and operating 2,400 restaurants in 44 states generating $4 billion in sales and employing approximately 73,000 people.

“The hotel sector continues to strengthen amidst a complex macro backdrop, demonstrating its ability to offer investors the potential for growing, inflation-protected cashflows,” said Tim Mooney, global head, real estate, Värde Partners. “These properties recovered quickly from the pandemic and have been performing well, indicative of the quality of their brands and the continued demand for limited-service and extended-stay hotels. “As this cycle continues to evolve, we believe there will be further opportunities to invest selectively in high-quality assets that are well-positioned to capitalize on the robust demand for business and leisure travel. We are pleased to partner for the second time with Flynn Properties to acquire this interest in another portfolio of properties in attractive locations with compelling market supply/demand dynamics.”

Deutsche Bank Securities Inc. served as financial advisor to Flynn Properties and Värde Partners on this transaction.