Starwood Capital forms joint venture with restaurant group

The private equity real estate firm has acquired a portfolio of primarily New York City restaurants, as well as formed a joint venture with the restaurants’ owner, BR Guest, to develop new eateries for its hotel portfolio.

Starwood Capital has purchased 16 restaurants from BR Guest, a New York-based restaurant owner and operator, and entered into a joint venture with the company in a series of transactions reportedly valued at approximately $150 million (€115 million).

Under the terms of the deal, which were initially reported last month by The New York Post, BR Guest will continue to manage the restaurants. At the same time, the company has formed a 50-50 joint venture with Starwood to develop new projects in the private equity real estate firm’s burgeoning hotel empire. Last year, Starwood announced that BR Guest would develop the dining establishments for the company’s new environmentally friendly line of hotels, called “1.”

The joint venture with BR Guest was announced in a statement released today.

“We will combine Starwood Capital’s brand building capability with our growing global real estate footprint to add value and differentiation through the BR Guest platform to many of our product offerings,” Barry Sternlicht, the head of Starwood Capital, said in the statement.

The restaurants in BR Guest’s portfolio include a number of well-known eateries in New York City such as Blue Water Grill, Dos Caminos and Ruby Foo’s, as well as two restaurants in Chicago and one in Las Vegas. Later this year, the company will open another outpost of its Primehouse steakhouse in New York City, as well as a Dos Caminos in the Venetian hotel in Las Vegas. The joint venture with Starwood will allow BR Guest to acquire other restaurant operators as well.

BR Guest is run by restaurant entrepreneur Steve Hanson. Hanson worked with Sternlicht on their collaboration on Blue Fin, a BR Guest restaurant located in the lobby of the W Hotel in Times Square, which opened in the beginning of 2002. At the time, Sternlicht was the chairman and chief executive officer of Starwood Hotels, where he developed the company’s W hotel chain.

Today, Starwood Capital continues to have a significant presence in the hospitality industry. In addition to the “1” line of hotels, the first of which is expected to open in Seattle in 2008, Starwood owns a portfolio of hotels in Europe including Societe du Louvre and Le Meridien. Last year, the firm announced that it was developing a luxury hotel brand based on Societe du Louvre’s flagship property, the Hotel de Crillon, located in Paris. In December, Starwood also invested $30 million in Shanghai Jin Jiang International Hotels, acquiring an approximate 10 percent stake in one of China’s largest hotel owners.

In 2005, Starwood raised an $800 million fund focused exclusively on the hospitality sector. Another vehicle, a $1 billion global private equity real estate fund, closed last year. Starwood also owns Mammoth Mountain, a ski resort in California, that offers another potential outlet for future BR Guest restaurants.