Looking to significantly bolster their respective portfolios while taking advantage of opportunistic markets, Meyer Jabara Hotels and LWHA Asset Management Services have joined forces to acquire, manage and asset manage a portfolio of five hotels in the Carolinas.
The deal—which marks the first time Meyer Jabara and LWHA will work together on hotel assets—involves major branded, select-service assets. LWHA will asset manage the properties, while Meyer Jabara—which also has equity in the portfolio—will manage the day-to-day operations. The majority ownership stake is being held by NCSC Hospitality Portfolio, a consortium of private real estate investors.
Gary Isenberg, president of LWHA Asset Management Services—a hospitality advisory firm—offered his perspective. “It will be significant to our portfolio, doubling the amount of hotels we’ll have under asset management. We worked with the investors to help put this deal together and to identify the management company once we came in as asset managers and it really made sense to go with Meyer Jabara. Our skill sets kind of dovetailed very well,” said Isenberg, who later added, “they [Meyer Jabara] were looking to grow in the South as well as in the select-service segment.”
Justin Jabara, vp, development, Meyer Jabara Hotels, acknowledged the Danbury, CT-based owner and operator wanted to round off its portfolio of nearly 20 hotels as he explained why the company agreed to the deal after being approached by LWHA.
“What was interesting about it was it’s a portfolio play. Meyer Jabara has been around for the past 40 years, but mostly in the full-service segment. So we’ve really looked at our development strategy and how we’ve been growing over the years and how we want to grow moving forward. So employing the portfolio concept of having a partnership with a great advisory group like LW, it just made sense,” he said.
The portfolio includes four properties in North Carolina: the 131-room Holiday Inn Express & Suites Wilmington-University Center; the 92-room Holiday Inn Express & Suites Goldsboro; the 93-room Fairfield Inn Charlotte Northlake; and the 109-room Comfort Suites Gastonia; as well as the 86-room Fairfield Inn Myrtle Beach North in South Carolina.
Jabara noted of the portfolio, “It’s hub and spoke; they’re all within one region. We think there are efficiencies to be gained there,” he said. Jabara went on to add, “from a management standpoint that’s what we found works best over the years.”
Isenberg underscored the benefit of having the properties clustered together. “The idea was to bring things together where we leverage economies of scale. The hotels are three-and-a-half hours from each other so you could get to all of the assets easily,” he said.
According to both executives, the aforementioned cities have growing economies with significant infrastructure and demand generator expansion plans, as well as a solid corporate business base.
Isenberg further described the markets as what he termed “recession resistant” in explaining the appeal to the investors. “The reason they chose these hotels is because they hit certain buckets for their business plan. Their business plan is to buy select-service hotels in secondary markets that are growing and emerging markets, specifically due to heavy retirement population moving in—such as baby boomers retiring—medical facilities growth, as well as university towns and any other type of growth expansion,” he said.
Roughly $5 million will be allocated for property renovations throughout the portfolio. The infusion of capital is intended to maintain the properties, sustain cash flow and improve guest deficiencies.
However, Isenberg was quick to point out that the hotels are in pretty good shape.
“These are cash flowing assets; they don’t need a lot of heavy lifting. They don’t need lot of renovation and value-add. It’s a long-term hold because these are good cash flowing assets with good long-term brands,” he maintained.
Jabara agreed, explaining why the company ultimately opted to put equity into the deal. “These are quality assets with quality brands in good markets. So when they came to us with the opportunity to operate it’s something we liked so much we put our money where our mouth is,” said Jabara.
He further touted the potential for improvement within the portfolio. “All of the hotels are operating well, but we still think there’s the ability to take some of our pedigree and what Meyer Jabara does best and apply it to that [select-service] model. It’s going to be slightly different because staffing is completely different and everything else, but when you can put true quality revenue management against a hotel like that there’s a lot of upside to be seen,” said Jabara, who added that centralized functions such as purchasing and accounting will also help improve the bottom line.
Isenberg was unable to provide details on the seller of the properties but noted the current deal is a long-term management agreement which coincides with the investment. He also added the NCSC consortium will continue to look for growth opportunities noted the investor s like the clusters. “The plan over the next 18 to 24 months is to take this portfolio of five and hopefully grow it up to a dozen hotels,” said Isenberg.