Pygmalion Capital holds first close or Pygmalion European Opportunistic Hotel Fund II
Pygmalion Capital Advisers (Pygmalion) has held the first close for Pygmalion European Opportunistic Hotel Fund II (PEOH II), backed by a European Private Bank and a European Pension Fund.
Capital coming into the Fund’s first close is already earmarked towards the acquisition of seed assets located in Italy, the UK and Ireland, that are under exclusivity. PEOH II is structured as a closed-end limited partnership (SCSp) domiciled in Luxembourg with a five to seven year life.
PEOH II is targeting an unleveraged equity volume of over EUR400 million. The first close comes just six months following its marketing launch with the assistance of PJT Park Hill, comprising institutional investors who recognize the window of opportunity created by Covid-19’s impact on the European Hotel sector.
The Fund’s strategy is focused on opportunistic European real estate hotel investments expected to deliver a net annualised IRR of over 15 per cent with regular quarterly income distributions for its investors and a maximum leverage of 60 per cent loan-to-value. The Fund’s objective is to build a diversified portfolio of approximately 20 special situations investments in three-to-five star hotels across Western Europe’s business and leisure destinations.
The investment strategy seeks to source and unlock value from both systemic and tactical Covid-19 triggered opportunities; these typically include undervalued, illiquid, distressed or complex situations offering both a discount at acquisition as well as post-CapEx Net Operating Income growth through more efficient operations and/or selective upgrading (refurbishment, branding/ rebranding) of existing undermanaged or underinvested properties. PEOH II will own both the real estate and, in some cases, the underlying operating business of each hotel as Pygmalion will work with operators under either leases or management contracts.
Strong investor appetite for the strategy is being gathered to enable a second close expected to take place at the end of March 2021. Given the opportunities to capture temporary valuation weakness in the European Hotel sector over the next 18 months, PEOH II further anticipates a final close toward the end of 2021.
Former Goldman Sachs banker Christophe Beauvilain, CFA, Founder and Managing Partner of Pygmalion Capital Advisers LLP, says: "We are excited about the early first close of PEOH II and its attractive initial investments expected to close in Q1 2021. The current market disruption caused by Covid-19 has led to what we view as the best investment period ever to invest in the European Hotel sector. Given the size of the opportunity and the need for speed of execution, we are expanding our investment team in London as well as our in-country asset management teams.”