April 14, 2022

CapitalSpring Raises $950M for Restaurant, Foodservice Investment

CapitalSpring this week announced the final closing of CapitalSpring Investment Partners VI, L.P. and parallel funds with $950 million of capital commitments.

Fund VI’s investment strategy focuses on providing structured loans and private equity solutions in support of buyouts, add-on acquisitions, organic growth, recapitalization and other complex financing needs.

Fund VI was substantially oversubscribed and exceeded its target of $750 million. The fund attracted backing from a diverse group of existing and new limited partners in the United States and internationally, including public and private pensions, endowments, foundations, funds of funds and family offices.

The fund will target investments ranging from $10 million to $150 million across the restaurant and foodservice industries as well as in related businesses across the business services, technology and manufacturing sectors.

Since the initial close, CapitalSpring has already completed four investments in Fund VI, representing over $200 million of invested capital.

Schulte Roth & Zabel LLP served as legal advisor to CapitalSpring on this fundraise.

Momentum Maintained by Pent-Up Demand

Mike McKean, founder, Retailsphere, tells GlobeSt.com that as people start spending more money on experiences and going out, especially at restaurants and bars, pent-up demand will almost certainly lead to an increase in openings across the board.

“It isn’t unexpected that a group like CapitalSpring would see such a large raise to invest especially in growing multi-unit groups,” McKean said. “They have the benefit of a model that can be quickly replicated and opened to meet this demand, plus many people are looking for slightly more casual options versus higher end concepts—most likely because of a continuing increase in cost of living as things start to open back up.

“Unlike in the previous few years, it wouldn’t surprise our team to see even larger investments continue into the coming year in the food and beverage industry.”

Indeed, the restaurant and foodservice industry is already experiencing a sudden uptick in hedge fund and private equity investment, according to Marbet Lewis, founding partner and firm CEO of Spiritus Law.

“Demand for hospitality services continues to increase and operators continue to try to stabilize cash flow while they come out of pandemic recovery,” Lewis tells GlobeSt.com. “While the hospitality industry is in full recovery, the pandemic left many operators limited in expansion opportunities as new profit balances out losses from the past two years.

Appetite Grows for Fast Casual, Quick Service

There is strong investor appetite for net lease investments in the quick service retail and fast casual space, particularly with household names like Chick-fil-A, McDonald’s, Taco Bell, Chipotle, and others, Daniel Herrold, senior vice president at Northmarq, reports.

He said emerging concepts such as Fuzzy Taco, Sweetgreen, Blaze Pizza and Slim Chickens, among others, are gaining popularity as well.

“Demand remains high for these assets as many were resilient through the pandemic and are typically located in strong retail locations,” Herrold told GlobeSt.com.

Higher yields are also driving interest in the casual dining sector, Afshan Kabani, vice president at Four Pillars Capital Markets, tells GlobeSt. “With compressed cap rates and interest rates on the rise, demand has really picked up in the past few months, and investors are seeing higher returns in this space,” Kabani said.