VM Hotel SPAC Backs Out of Hotel Deals, Switches to Air Purification
By Chava Gourarie November 2, 2022 5:11 pm
reprints
A Canadian investment firm backed out of acquiring five hotels via a special purpose acquisition company (SPAC), and pivoted to an air-purification startup as its qualified acquisition.
VM Hotel Acquisition Corporation (VMH), a SPAC sponsored by VCM Global Asset Management, was launched in January 2021 with the expressed purpose of acquiring distressed hotel assets, according to its prospectus.
In particular, VMH — led by veteran real estate executives — planned to focus on hotels in city centers that had been hurt by the COVID-19 pandemic but would, in time, rebound.
By December 2021, the company had negotiated the purchase of a five-hotel portfolio as its qualifying acquisition, according to an announcement from the company. The portfolio included four hotels in the U.S. and one in Canada for a total cost of $411 million. The company intended to purchase the hotels through a combination of mortgage financing and money raised through the SPAC, which would become a publicly traded real estate company on the Toronto Stock Exchange once the deal was completed.
But the deal soon began to fall apart.
In February 2022, VMH pulled out of the purchase of two hotels, the Battery Wharf in Boston, and a Sheraton hotel in Montreal, according to a press release, while still considering whether to proceed with the purchase of the other three. A month later, it terminated an agreement to purchase the Sheraton Panama City Beach Golf & Spa Resort in Panama City Beach, Fla., for $67 million, according to a complaint filed in New York court by the seller, Torchlight Investors.
Torchlight sued VMH for a termination fee of $696,000 in late October, but has since rescinded its complaint, according to someone with knowledge of the case.
Finally, in April, VMH pulled out of the final two proposed acquisitions of hotels in downtown Cleveland, both owned by Skyline Investments, citing economic volatility. Prior to the acquisition announcement, Skyline had planned a $62 million renovation of the landmarked Renaissance Hotel, which would see it return to its original name, the Hotel Cleveland. The planned renovation is moving forward, according to local reports.
There is no requirement for SPACs to stick to a particular geography or business sector, so VMH began expanding its search outside of real estate. In September, it announced a new target acquisition in another industry impacted by the global pandemic, but this time for the good. VMH now plans to merge with Boynton Beach, Fla.-based Pyure, an indoor air-purification firm that was founded 15 years ago, according to a business combination agreement filed with the Alberta Exchange Commission.
The deal values Pyure at $250 million and needs to be approved by VMH shareholders. It is expected to go to a vote before the end of the year.
VMH was launched at the height of the SPAC boom. Since the winter of 2021, SPAC activity has deflated and many blank-check companies have had difficulty finding target acquisitions. As the economy turned in the winter of 2022, SPACs performed especially badly, thus eroding their appeal even further.
McAuley declined to comment due to securities disclosure laws. Counsel for Torchlight Investors didn’t immediately respond to a request for comment.
Chava Gourarie can be reached at cgourarie@commercialobserver.com.
