“We are looking for projects in the regions” – Giorgi Danelia, Director of the Partnership Fund Investment Department.
The Partnership Fund – the main partner of the first branded hotels in the Georgian regions, such as Best Western Kutaisi, the Borjomi Likani Hotel (formerly Rixos Borjomi) and Radisson Blu Tsinandali – has been working on new projects across the country. Director of the Investment Department of the Partnership Fund, Giorgi Danelia, spoke to Property Georgia about the investment strategy and the potential for the development of tourism in Georgia.
By Kate Tabatadze
- The Partnership Fund has supported the development of numerous international hotel brands in the Georgian regions. How would you assess the country’s tourism potential, and how does an active hospitality sector influence the local economy and standard of life?
- With regards to real estate, the fund focuses on developing and funding hotel projects. This applies to the provincial regions in particular, where potential is high, but the level of activity is still low. We are less active in Tbilisi and Batumi, as these two markets are successfully developing independently from us. Nevertheless, we are carrying out two projects in Tbilisi in the shape of the Hyatt Regency hotel on Rustaveli Avenue and the Park Inn on Chanturia Street.
We are mainly looking for projects in the regions where creating jobs, developing infrastructure and creating value is highly important. One example is Borjomi. In 2011, when we began working on a 5-star hotel project here, many people were very sceptical. Back then, we said that the priority was to create demand, and the development would definitely follow. That is precisely what happened: by the time our construction project entered its final stage, another high-end hotel had opened in Borjomi in the shape of Crown Plaza, as well as several smaller hotels.
Similarly, we revitalised the Kakheti region, which is another growing market. The region’s first branded hotel in the form of Radisson Blu Tsinandali will open in autumn. This will be the start of a new stage of development for Kakheti. To this end, the expansion of Lopota into a 170-room complex is also an important project. These will be the two largest hotels in Kakheti, serving large events of all types.
Another project worth highlighting is Best Western Kutaisi – the first branded hotel in the city. We opened this hotel in May 2017, and it was bought out in September of the same year. Kutaisi has exceeded our expectations. For us, one of the factors determining success is how quickly our partners can buy out our share. Kutaisi needs more hotels. The local airport is being expanded, which means more flights and more tourists. We also have an ongoing project in Abastumani, which is being developed in accordance with a new concept, transforming the entire appearance of the resort.
- What does the Partnership Fund represent for an investor?
- Investors approach us with their projects, which we proceed to study. If a project is of interest to us, then we will become involved. We also help our partners communicate with the banks. We take up no more than a 49% share of a project for a period of 5-7 years, at an interest rate of 13-15%. This is different from a bank loan, and involves capital participation on our part. Our main principle is to be minority shareholders. We create a joint company, where we have a representative on the supervisory board participating in the decision making process at all main stages of construction. Once the project becomes operational, our role becomes limited to reporting. One exception is the Borjomi Likani Hotel, where we own a 100% share.
- With regards to the Borjomi Likani Hotel, are you negotiating with any specific investors or hotel operators?
- At this stage, we are operating the Borjomi Likani Hotel ourselves. There has been a lot of interest both from investors and large international hotel brands. We are talking about a 40 ha territory where only a small part has been developed thus far, leaving a lot of potential for construction of a large complex. The first stage will consist of a hotel, while the second and third stages will involve construction of additional infrastructure together with investors.
- We understand you also have news about a development project in the resort of Tskaltubo.
- We first became interested in Tskaltubo in 2015 and commissioned a feasibility study by an Austrian firm. We have prepared a business plan for each state-owned building. This is primary material for investors, which can be changed in accordance to their requirements. The Partnership Fund is ready to become involved in funding the development of the Tskaltubo spa resort. It is worth noting that quite a lot of money has been spent on infrastructure in Tskaltubo as part of World Bank’s regional development programme for Imereti. This brought Tskaltubo to the fore and created a strong basis for subsequent development. The total primary investment is $800 million. Global demand for health and spa tourism is growing, and in this regard, Tskaltubo is a unique resort.
- Are you considering any new projects in Tbilisi or other Georgian regions?
- We are currently exploring more than 10 hotel projects, mainly in provincial locations such as Bakuriani, Gudauri, Pasanauri, Racha and highland Adjara. In Racha, we have prepared a feasibility study. The project focuses on the resorts of Shaori, Shovi and Utsera. We have already started negotiating with an investor in Shovi regarding the development of a high-end hotel. We are also actively working on Shaori and Utsera. At the same time, the Ministry of the Economy is in the process of preparing a spatial planning document.