Avana Companies, Oaktree Capital Management Form $250M CRE Investment Vehicle

Four years after taking some of the biggest hits during a global pandemic, the hospitality sector is primed for a new infusion of rescue capital and bridge debt. 

Earlier this year, Avana Companies, a lender specializing in small business financing, announced it has formed a $250 million partnership with Oaktree Capital Management to invest private debt into U.S. hospitality and other commercial real estate assets over the next three years. 

The partnership is also in negotiation with IHG Hotels & Resorts, a firm best known for its Holiday Inn, Holiday Inn Express, Kimpton and Candlewood Suites brands. Moreover, Oaktree has agreed to allow co-investment by its retail investors of up to 10 percent in deals associated with the partnership. 

Oaktree Capital Management is a global investment firm with $205 billion worth of assets under management (AUM), having begun with an AUM of $5 billion in 1995. 

Sundip Patel, CEO and co-founder of Avana Companies, told CO that after working closely with Oaktree Capital Management for the past decade, he felt it was time for his firm to move into the commercial real estate space. Avana started off in small business private credit and spent the last five years financing solar farms and renderable energy farms. 

“We started the company 22 years ago and focused on private credit long before it became popular,” he said. “We focused on SMEs (small and medium-size enterprises), and the goal was to raise private capital to invest into small businesses in America that were creating jobs.”

He added that his team later turned to hotels. “We found that when doing projects in hospitality, typically, you’ll create jobs during construction, but you’ll also affect the peripheral economy — the florists, the laundromats, the restaurants, the cafes, the bookstores — and have this permanent job creation once the project is built.”

While Oaktree is the senior partners in the $250 million fund, Sundip said his firm will prioritize assets beyond hospitality, especially in the multifamily space, when it looks to deploy debt capital. 

“It’s credit, it’s on the debt portion with senior lien positions, and the loans that we make out will use the $250 million,” he explained. “Our ticket size will be, on average, under $20 million on individual loans, and I’d venture to guess the smaller [loans] will be $10 million or $12 million and the largest [individual loan] will be around $20 million.” 

Sundip said that his firm will prioritize deploying bridge financing into top 200 metropolitan statistical areas in the first year of lending. 

“Typically it will be [a bridge loan] that needs some dollars to get stabilized, typically a two- to three-year term,” he said. “And the other type of ideal client is someone who wants to build a project, a new Holiday Inn or IHG hotel in the market.”

Four years after COVID, Sundip described the hospitality marketplace as “very good” on the heels of Americans experiencing a renewed interest in domestic and corporate travel. 

“It’s done very well. You have people who still travel, there’s a lot of leisure travel, families travel a lot, and now corporate travel is returning,” he said. “People want to get out. They’re social animals, so that segment is doing really well, unlike office buildings that are suffering.  

“All we’re trying to do is deploy [capital] into good assets and create good jobs in our economy,” he added. 

Brian Pascus can be reached at bpascus@commercialobserver.com