Kimpton Raising Capital for New Hotel Fund

The University of Michigan Endowment in Ann Arbor, Mich., had committed $20 million to the KHP Fund III L.P., the latest investment fund being sponsored by San Francisco-based Kimpton Hospitality Partners.

The strategy for the fund is to acquire, manage, lease, develop and redevelop boutique and lifestyle hotels in select major North American markets. It was not clear if this would include properties in the Bay Area.

The hotels will be managed and operated by Kimpton Hotel & Restaurant Group LLC at 222 Kearny St.

The Michigan endowment also will own an unspecified interest in the Kimpton Hotel Group, the parent company of Kimpton Hotel & Restaurant Group LLC. The fund will share in the revenues and growth of the management company, according to documents presented in mid-April to the university’s Board of Regents.

Kimpton would not comment on the commitment because the hotel management firm has not yet completed its capital-raising efforts, a spokeswoman said. It hopes to do so later this year.

Kimpton operates more than 50 hotels and more than 50 restaurants in 23 cities, including nine hotels in San Francisco and one in Cupertino, according to its Web site.

The fund manager is expected to target three kinds of hotel deals. One approach will be to buy existing hotels in desirable locations but in need of renovation and market repositioning. The fund will also target well-located existing buildings that are suitable for conversions to a hotel. These buildings could be offices, government properties and warehouses. The fund also will consider existing boutique hotels in good physical condition but in need of improved management and marketing.

The University of Michigan and Kimpton have had a long-term relationship. The endowment had committed a total of $40 million to prior Kimpton Hospitality Partners’ sponsored funds.

The University of Michigan endowment has a real estate investment portfolio valued at $1.1 billion at the end of February, according to public records. Real estate investments total 14 percent of the investor’s $7.7 billion of total plan assets.

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