Interstate inks deal for Indian investment

Interstate Hotels & Resorts has formed a 50-50 joint venture partnership with JHM Hotels to operate and selectively invest in hotels in India.JHM Hotels is
one of the nation’s largest independent developers and owners of hotels.
The joint venture, named JHM Interstate Hotels India, will serve as
Interstate’s platform for all hospitality-related activities in India,
primarily focused on securing management agreements on existing and
to-be-built hotels. The joint venture is establishing an office in New
Delhi, India.

  In addition to the management platform, both Interstate and JHM have
committed to invest in Duet India Hotels Limited, a U.K.-based, real estate
investment fund dedicated solely to the investment of hotels in India. The
fund has raised approximately $175 million in equity with anticipated total
equity contributions in excess of $200 million. The fund’s mission is to
develop approximately 25 hotels in India in the three- and four-star
categories, targeted at business travelers and located in secondary and
tertiary cities, as well as satellite townships outside major urban
centers. The fund is expected to invest in up to $800 million of total
project volume over the next five years. Interstate and JHM will invest
equal portions of a $12.5 million total investment to acquire an interest
in Duet India Hotels Limited, as well as an interest in the fund’s asset
manager, Duet India Hotels Asset Management Ltd. The fund has committed to
providing JHM Interstate Hotels India the first opportunity to manage the
hotels in which the fund invests. For further information about the fund,
contact Dilip Puri at [email protected]

  The joint venture also has established a strategic relationship with
JNB Hotels and Resorts Private Limited, a subsidiary of JNB LLC, a real
estate investment group based in Artesia, California. JNB has developed
through its Indian experience and market knowledge, a strong pipeline of
hotel management opportunities throughout the country on behalf of the
joint venture. For more information about JNB, visit their Web site:
http://www.jnbinvest.com.

  “The formation of this new management joint venture establishes a solid
platform for our entry into India’s fast-growing lodging market,” said
Thomas F. Hewitt, Interstate’s chief executive officer. “By combining this
platform with our investment in a hotel real estate investment fund we have
a robust pipeline of management contracts and a strong foundation for
future expansion. In addition, the joint venture is actively sourcing other
management opportunities throughout key markets in India.

  “Our joint venture partner, JHM Hotels, is a highly regarded, well-
established hotel owner/operator in the United States with extensive market
knowledge in India,” he added. “H. P. Rama, JHM’s founder, is a 30-year
industry veteran whose family has one of the most well respected names in
the industry. JHM has received numerous industry awards for excellence,
most recently from Marriott International, which presented the company with
a record nine awards, including two Partnership Circle Awards, Marriott’s
highest honor. We look forward to building a long and mutually rewarding
relationship together.

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  “With Interstate’s international experience, depth of resources and
strong relationships with all the major hotel brands, we believe our
combined strength, knowledge and expertise will give us a competitive
advantage in arguably the most underserved hotel market in the world,” said
H. P. Rama, founder and chief executive officer of JHM Hotels.

  Rama noted that India is one of the fastest growing economies in the
world. “India is the world’s fifth largest economy, growing at a healthy
8.5 percent per annum. As a result of this rapid growth, international
development in the country is surging and has created a strong demand for
hotel rooms. It is estimated that India will need another 200,000 western-
style hotel rooms, approximately double the current inventory, by 2010 to
meet the demand.”

  Hewitt pointed out that the need for experienced hotel management in
India is significant. “The current lodging environment in India offers a
limited selection of management and brand options. Our focus there will be
to manage and opportunistically invest in hotels, as well as to provide
hotel owners with franchise opportunities from well-established hotel
brands.”

  “These transactions support Interstate’s mission of becoming the
leading independent, multinational hotel operator,” said Leslie Ng,
Interstate’s chief investment officer. “Our partnership with JHM is a
perfect match, with JHM providing lead generation, cultural expertise and
depth of local contacts, and Interstate supplying the operating platform,
systems and back-of-the-house operations.”
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