Raffles Hotel buyer known for reselling properties
Jul 22, 05 1:57 am
Colony Capital's forte lies in trading low-priced real estate for sizeable profits
By Fiona Chan, The New Straits TimesThe American investment firm that snapped up Raffles Holdings' hotel business in a surprise deal on Monday may not be buying the hotels for keeps, if its stated strategy is anything to go by.Los Angeles-based Colony Capital, which spent $1.72 billion on buying 14 hotels and management contracts for another 27, specialises in buying low-priced, out-of-favour properties in order to 'flip' them. This refers to the practice of reselling the properties for a sizeable profit.
http://www.holidayhomeseuro.comNotable properties Colony has 'flipped' include the Savoy Groupof four of London's best-known luxury hotels, including Claridge's and the Savoy, which it bought with private equity firm Blackstone in 1998 for £520 million (S$1.54 billion) and sold last year for £750 million. Many industry-watchers believe the key to Colony's success is founder and chief executive Thomas J. Barrack, who recently won high praise for his foresight from billionaire business tycoon Donald Trump.
Mr Trump was quoted in a Bloomberg report in May as saying that Mr Barrack, 57, 'has the ability to see into the future and know where the markets are going better than virtually anybody'.
The privately held Colony, which employs more than 110 staff in 13 offices around the world, refers to its investment strategy on its website as 'cautious contrarianism'.
One of its first investments in the early 1990s involved buying US$1 billion (S$1.69 billion) worth of apartment buildings at half their value during the United States' savings-and-loan crisis, during which few people were willing to touch the real estate market.
When real estate prices picked up in the mid-1990s, the company sold its holdings for an estimated 90 per cent profit. But those worried about changes to the 118-year-old Raffles Hotel, one of those newly acquired by Colony, can rest easy for now.
In a statement issued on Monday, Mr Barrack said that Colony recognised 'the need to keep talented and experienced management and employees and we look forward to working with them'.
He said the hotel's legacy will be protected. 'We deeply respect the historical significance of the Raffles Hotel...and we consider it our responsibility to protect that legacy.'
Mr Barrack, who holds a law degree, served as a deputy undersecretary of the interior under former US president Ronald Reagan, and managed the property investments of billionaire Robert Bass before establishing Colony Capital in 1991.
Since then, Colony has invested over US$15 billion in more than 8,000 assets that cover most of the real estate industry, from Atlantic Citycasinos to a baseball dome in Japan.
Last September, it acquired four casinos from Harrah's Entertainment and Caesars Entertainment to the tune of US $1.2 billion. The company also holds a one billion euro (S$2.04 billion) stake in French hotel and casino giant Accor.
Raffles Hotel is by no means the only historic property in Colony's diverse portfolio. In June last year, the firm bought the Las Vegas Hilton,where Elvis Presley made his famous 1969 comeback, for US$280 million.
Colony yesterday declined to comment on the deal.
Key to success
COLONY Capital, which employs more than 110 staff in 13 offices around the world, refers to its investment strategy on its website as 'cautious contrarianism'.
One of its first investments in the early 1990s involved buying US$1 billion (S$1.69 billion) worth of apartment buildings at half their value during the United States' savings-and-loan crisis.
When real estate prices picked up in the mid-1990s, the company sold its holdings for an estimated 90 per cent profit. Since then, Colony has invested over US$15 billion in more than 8,000 assets that cover most of the real estate industry.
Source: The Straits Times, Singapore