A $300-Million Pool To Buy Distressed Hotels
One man’s crisis is another’s opportunity. And in this economic environment, those companies with spotless operating records and clean balance sheets are best able to take advantage of the situation. That’s what Concord Hospitality Enterprises hopes to do with a $300-million private equity fund it announced at The Lodging Conference last week in Phoenix.
“These are the best of times if you have cash,” said Concord President & CEO Mark Laport during an interview at the Arizona Biltmore. “You also need to be able to pull the trigger quickly because this window of opportunity will be open only a couple of years or less.”
Laport says Concord will use the fund, which should close by late fall, to buy some of the distressed hotels and debt that are beginning to flood the marketplace. The fund will have three years to invest its money, although Laport believes most acquisitions should be complete within 18 months of closing. Targets will be upscale and select-service properties with major brands. Most will be renovated, repositions and in some cases, rebranded. Laport says most transactions will be all-cash with financing to follow in some deals.
“The fund will allow us to continue our plan to double the size of our portfolio within the next few years, despite the recession,” he said. “There will be attractive acquisitions opportunities for both hotels and hotel debt, and we expect to be a significant player in those markets.”
It was Concord’s superb timing that puts it in a position to pounce on the ailing market. Two years ago—the height of the last bull market—the company sold a 19-hotel portfolio for more than $500 million, which it leveraged to develop 16 new hotels. Thirteen are open, with the remainder to open this year or next. The slate of hotels leans heavily toward Marriott brands, with a sprinkling of Hilton and other flags.
Laport says the company will also continue to aggressively grow its management contract business. So far this year, Concord landed four new management deals with three more expected before 2010. In August, it signed a contract to manage (Concord is also a joint-venture partner in the deal) the 88-room Ocean Sands resort in Pompano Beach, FL. The property, Concord’s first resort, is undergoing a $5-million renovation. And the company recently signed its first Starwood management agreement for a 382-room property in Houston.
While growth is on Laport’s mind, he’s also focusing on operations and profitability for the 30-plus hotels it currently operates and/or owns.
“We’ve removed all of the fat from these properties, so now our focus is all on the top line,” he says. Among the revenue initiatives have been hiring of additional sales people and revenue managers. “We’ve also enhanced websites for all properties so they appear first or close to it in web keyword searches. More importantly, though, we make sure our GMs are the sales leaders of their properties.”