The credit crunch has made it difficult to get financing for new projects, so Kor Hotel Group has made a deal for foreign money that will help ensure its future growth.
Kor Hotel Group, a unit of Los Angeles-based Kor Group, has sold a 50 percent stake to the Mubadala Development Co., which is owned by the emirate of Abu Dhabi.
The strategic partnership will focus on Kor Hotel’s expansion into foreign markets by taking its luxury boutique brands Viceroy and Tides into Europe, Asia and the Middle East.
Kor plans to focus on managing either Mubadala-owned properties or acting as a manager for other properties. The group does not plan to build or own the hotels.
“These kinds of developments are enormously draining,” said Brad Korzen, chief executive of the Kor Group. “From a risk standpoint, it’s more advantageous for us to be the manager.”
The new partners are currently working on opening four properties in the Persian Gulf region, including hotels in Abu Dhabi, Dubai and Oman. Kor is also setting up regional headquarters in Abu Dhabi.
Korzen declined to say how much Mubadala paid, though he called the purchase price “meaningful.”
“Mubadala are very serious investors, and we expect them to introduce us to new opportunities,” he said.
Richard Mintz, a spokesman for Mubadala, said the Abu Dhabi company’s hospitality investments center on companies with good track records.
“Mubadala likes finding very entrepreneurial companies with an interesting brand, and Kor certainly fit that bill,” Mintz said. “Kor has expertise in hotel management and creating a distinct guest experience. With their interest in expanding and our interest in brand leaders, it was a really good match.”
Unlike most sovereign wealth funds, which invest money passively, Mubadala manages and develops its own projects.
Last year, Mubadala invested in real estate development firm Related Cos., which is working on L.A.’s Grand Avenue project. (Mubadala is not directly involved in Grand Avenue, though; Istithmar, a Dubai fund, was approved as an investor in the project earlier this year.) Mubadala also has a joint agreement with MGM Mirage Inc. to build a $3 billion resort in Abu Dhabi. The resort would not include gambling because it’s forbidden in Muslim nations.
Mubadala has also invested in the U.S. energy, technology and aerospace industries. It owns 7.5 percent, or a $1.35 billion stake, in private equity firm The Carlyle Group and 8 percent of Silicon Valley’s Advanced Micro Devices.
Kor Hotel Group operates 10 hotels worldwide and has plans for another 10. The Mubadala partnership will add more to those 20.
In Southern California, Kor hotel properties include Viceroys in Santa Monica and Palm Springs, Avalon Hotel and Maison 140 in Beverly Hills, Delfina in Santa Monica and Chamberlain in West Hollywood.
Under its real estate division, Kor Realty Group LLC, local Kor condominium properties include the Eastern Columbia and Barker Block, as well as three apartment buildings, all downtown.
Alan X. Reay, an Irvine-based hotel analyst, said the partnership with Mubadala is a good strategic move for Kor.
“With the uncertainty in the marketplace right now, to have an investor of the quality of Mubadala will free Kor up to buy more assets as they come to market,” Reay said. “It’s a unique competitive advantage.”
