Since amassing a circa $5bn (£4bn) hospitality portfolio in the US, Hawaii-based Trinity Investments has been writing the book on market-leading transactions in turbulent times. Major deals that it closed last year included teaming up with Credit Suisse Asset Management to buy the Diplomat Beach Resort in Hollywood for a reported $835m from a Brookfield private real estate fund.
Now the investor and operator has dispatched one of its own to London to pen a new chapter in its growth story.
As an operating partner that teams up with private equity firms, Trinity is among the value-add players setting its sights on the UK and European markets. Managing partner Ryan Donn has relocated to London to lead that drive.
The firm plans to spend at least €100m (£87m) on each property, although the preference is for acquisitions valued upwards of €300m.
“There’s a lot less competition [for] the larger deals,” Donn tells EG. “We do great things when we don’t have to compete as hard and when we can devote more resources to a deal, which is harder as it gets smaller.”
Trinity’s US portfolio comprises 11 properties skewing heavily towards resorts, including assets operating under Hilton, Marriott and Hyatt brands. Each property has as many as 1,000 bedrooms, although Donn says it will not replicate this in its European strategy since “those opportunities don’t exist in the same way”. The European business seeks to increase its exposure to urban hotels.
“In Europe, we do want to find great resorts,” says Donn. “We also look at ski resorts. But we like the profile of owning urban hotels in Europe much better than we’d like in the US. There are a lot more headwinds to making good operating profit in the US and cities than there are here.”
Adjusting to new markets
Locations on the wishlist include the UK and Ireland, Spain, Portugal, Italy and Switzerland. “The UK is really intriguing to me – there’s a lot of different ways to play the UK,” says Donn. “This is true of certain other countries or locations in the post-Covid climate – people are rediscovering the UK and getting outside of London or the other major cities in a way that was a little bit lost for a while.
“We’d love to own something great in London, as would just about every hotel investor in the globe, and that’s easier said than done. But London [is] necessarily on our radar. We also like other markets – we like Scotland a lot.”
Donn adds that the market in the UK and Ireland has benefited from the strong dollar. “Where there may be softness in spending for domestic travel, over here, there’s still a lot of inbound US or other currencies coming in and making up for a lot of it,” he says. “US travel into the UK and Ireland right now is extremely strong.”
Donn’s own move from Hawaii to London has involved a period of readjustment. He recounts how he was warned, by a close friend at a major opportunity fund, that deals across the pond “will be half the size and twice as hard”. For Donn, it has been the trickiest facet of the market to adapt to so far, but he remains undaunted.
“The value proposition we offer our partners is that we’re full service, asset management, investment,” he says. “We can acquire, refinance and sell. Then we have asset management where great hotel experts and professionals enact the business plan. That’s one silo, then we have the construction project management and financial accounting and reporting teams. All the disciplines we need to run an effective operation, that not every operating partner has.”
Writing the first chapter
Since it was founded in 1996, Trinity has invested more than $6.1bn in hotels and resorts, totalling more than 14,000 rooms. As well as its London base, the firm has its headquarters in Honolulu and an office in Los Angeles.
Donn is clear about his mission to emulate the firm’s US platform in Europe. “We’re starting out and we know what we’re going to do, we’re going to be inspired by what we created in the US, which is high-quality assets in high-quality places,” he says. “And we strive to have high-quality partners at all times. That’s been a fundamental philosophy and we’ve done a great job of that in the US.”
Donn is aiming to acquire six to eight hotels in “a few different countries” on the continent in the next two to three years, potentially comprising a mix of urban properties and resorts, overseen by a team of eight to 10 professionals.
“That would be a good close to chapter one,” says Donn. “Then next chapter, maybe an official fundraise, going bigger and broader”. By that point, the European business would ideally have some €1.5bn under management.
The plan is to close “a few” deals independently before fundraising, citing a “successful” first fundraise in the US in 2021, in which an affiliate raised $520m targeting upscale and luxury US hotels.
“Between now and then, we’re looking to be capable partners – joint ventures, like we do in the US,” he says.
Recent hires include vice president Mai Kawashima, who joined in September from Savills, where she was a director in the hotels capital markets team.
He also pointed to some “pipeline” asset managers and project manager roles behind its first acquisition, which is under offer and set to close in Q1. The team has set up shop at Argyll’s serviced offices at 42 Brook Street in Mayfair, W1, for six months, with a view to taking up “more permanent” new space in 2024.
The favoured child
Looking ahead, Donn predicts 2024 is likely to herald “impetus for change in ownership” as debt maturity pressures mount. He adds that once there is confidence interest rate levels have tapered off, buyers will “lean in a little bit more too”.
Notwithstanding ongoing macroeconomic pressures, the investor is confident in the strength of Europe’s hospitality market, which has held its own compared with other asset classes such as offices or retail.
“I’ve been doing this for 23 years – for the first time, hotels are probably the most favoured child [among] the asset classes,” says Donn. “I’m encouraged. 2024 is going to have some activity – the only thing standing in the way of deals are sellers and buyers having the same pricing expectations.”
Although pricing guidance for assets has fluctuated throughout the year, Donn says Trinity will stand by its purchase offers.
Donn added: “Our attitude is, we know how to price hospitality. We have that confidence in ourselves. If the seller wants a huge number and we’re not there, then we’re fine articulating where we are, [and with] waiting and saying, ‘If you like that number later, we’re still around’. We’ll stand behind it. We look at value as standing [for] longer than a moment in time.”
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