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Published 14 October 2019

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By: CoStar

Queensgate pays $400 Million for Properties in Four American Gateway Cities.

A private equity firm based in London that’s on a mission to expand its collection of U.S. hospitality properties acquired a portfolio of four boutique hotels that offer a “luxury hostel” experience of communal sleeping areas in addition to traditional single rooms. Like coworking and coliving, this business model is a bet that people will sacri ce some privacy to save money if the surroundings are upscale.

Queensgate Investments paid about $400 million, or 330 million pounds, for the Freehand Hotels portfolio that contains 922 rooms spread across four properties in downtown Los Angeles, New York, Miami Beach, Florida, and Chicago. The seller was a group that includes The Yucaipa Cos., a Los Angeles-based private equity rm founded by billionaire Ronald Burkle and hotel creator and manager Sydell Group.

The transaction is the latest sign of the strong demand among global investors for U.S. properties, especially in gateway cities such as New York City and Los Angeles that anchor their regional economies. International companies are drawn to the U.S. market because they consider it relatively safe, stable and therefore nancially liquid, according to the report and investors. Thirteen of the world’s Top 25 markets for real estate investment are in the United States, a Cushman & Wake eld report found. New York ranked rst and Los Angeles came in second.

The Freehand hotels are meant to offer an alternative for travelers seeking upscale rooms without the means to stay at higher-end hotels such as the Four Seasons. The Freehand common areas are designed in a luxury aesthetic, but the rooms are sparely appointed and some are communal, with four beds in a shared room similar to a hostel. The price for a bunk in a communal room in Los Angeles is $49 a night, according to Freehand’s website, which is certainly a lower price than a traditional hotel that had an average daily rate of $180 in Los Angeles County last year. That price may also undercut prices visitors might and on AirBnB.

Freehand hotels are considered trendy establishments that “combine the social culture of a hostel” with food-and-beverage offerings, according to Hodges Ward Elliott, the hotel brokerage rm that represented Yucaipa and Sydell in the sale. Conde Nast Traveler describes the hotels as a collection of “poshtels,” a nickname coined for an inn with communal sleeping areas that are partially or totally formatted as a hostel with the polish and amenities of a boutique hotel in the common areas.

The purchase demonstrates investors’ keen appetite for hospitality properties that are unique in terms of aesthetics and local color but also are inexpensive enough to be resistant to a recession or competition such as short-term rentals like AirBnB. The concept is on the rise at the same time as the ascent of coworking, in which shared upscale of ce space can be rented on a relatively inexpensive short-term basis, and coliving, with newly designed apartments that have shared common areas for the tenants to save money.

The Freehand in Manhattan, for instance, is a 1920s-era building that was the George Washington Hotel in its previous incarnation, the haunt of many distinguished writers and artists. Famed author W.H. Auden, who stayed there in the late 1930s, went so far as to write an ode to the property, which he presented to the manager as he was checking out, according to the New York Times.

Generator, a Queensgate company, plans to manage the properties that are retaining the identity of the Freehand and Queensgate’s Generator brand.

Queensgate’s acquisition also includes the Broken Shaker bar concept and locations in the hotels.

Queensgate’s U.S. hospitality portfolio also includes the Generator Hotel, a former Courtyard by Marriott in Washington, D.C.’s Dupont Circle neighborhood, and the Generator Miami Beach. The company also plans to expand its portfolio in the United Kingdom.

“There is now a signi cant push to grow the presence of both Freehand and Generator across the U.K. and Europe, with opportunities currently being evaluated in London, Edinburgh, Milan, Amsterdam and other gateway European cities,” Puneet Kanuga, investment director at Queensgate, said in a statement.

Queensgate, founded in 2011 by Jason Kow, is a partnership involving the Kow Family, wealth manager Alvarium Investments and Peterson Group of Hong Kong.

For the Record
A Hodges Ward Elliott team of Mark Elliott, Rudy Reudelhuber and Jay Morrow brokered the transaction on behalf of the seller.

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