OYO Hotels & Homes is looking into setting up a hospitality property fund and has held discussions with a number of global money managers on this, people in the know said, even as the SoftBank-backed hospitality chain continues to expand its presence across the globe.
The decision to set up a fund, which will acquire properties across markets and lease those to the Gurgaon-headquartered company at an agreed-upon yield, is still at an exploratory stage, the people said. The company, they said, has held initial conversations with some of the world’s top asset management firms to come on board as a possible co-manager of the fund.
There is no guarantee as yet that the company, which was valued at about $5 billion in its last round of equity financing when it raised about $1.2 billion, will go ahead with setting up of the fund. But such an investment vehicle will give OYO the financial heft, as it strives towards its stated goal of emerging as the world’s largest hospitality chain.
The size of the proposed fund is yet to be fixed, but if set up, it could become a game-changer for the company in terms of the assets it will control. It has so far undertaken the leased, franchised and managed models, with full inventory control over its properties under its brands.
If OYO, which has claimed to be the world’s sixth-largest hospitality chain, decides to go ahead with the plan, it is likely to raise separate capital for the fund from global investors, the people said. The proposed fund will also look to set up special purpose vehicles that will house the assets it acquires.
The developments come at a time when the company is on an expansion spree. Last week, OYO announced its entry into the US, the world’s largest consumer market.
OYO has committed to put in $300 million over the next few years in the US, which will be one of the largest commitments made by the company to a particular market. It had earlier stated that it would invest $600 million in China, and an additional $200 million in India, both of which it refers to as its two home markets.
Apart from China and India, it is present in the UK, Europe, Indonesia, Malaysia, Nepal, the UAE, Saudi Arabia, the Philippines and Japan. As per latest data shared by the company, it operates about 20,000 buildings, spread across its various brands, with 7,00,000 keys under management.
In certain markets, such as Japan, the company has formed joint ventures to launch its flagship businesses. In April, the company said it had entered into a JV with its biggest institutional investor, SoftBank of Japan, to launch its hotels business.
Prior to that, in February this year, it launched its housing rental service, OYO Life in Japan, through OYO Technology & Hospitality Co, which counts Yahoo Japan as a stakeholder.