Initial deals expected to be announced in the second quarter
as HE adds new territory and Trust cultivates existing relationships.
ATLANTA – Owner-operator Hotel Equities has formed a
strategic partnership with a revived Trust Hospitality to develop a management
portfolio in the Caribbean-Latin American region. The partners are expected to
announce initial deals in the second quarter with potential op-co acquisitions
in the region leading to more aggressive initial growth.
Coral Gables, Florida-based Trust Hospitality, which sold
its portfolio to Highgate in 2020 but retained the brand’s intellectual
property, will leverage its longstanding relationships to bring deals to the
table, while Hotel Equities, with its more than 300 hotels, will be positioned
as the operational engine and a potential capital partner in deals. Hotel Equities has a lot of dry powder to pursue more deals, alliances and JVs after it formed a strategic partnership with private equity firm PPC Enterprises in January.
Trust principal Michael Register and Hotel Equities Chief Development Officer Joe Reardon told Hotel Investment Today in an exclusive interview that about 18 third-party deals are in the pipeline today and they are
confident the new partnership will sign at least six deals in the second quarter.
We looked at the CALA opportunity long and hard through our HR lens, our political lens and went out to our brand partners, who welcomed us with open arms and said, ‘come on in, we’ll help you guys.’ And the Trust guys are amazing and have relationships we could never think of having.
Joe Reardon
Perhaps more importantly and to supercharge growth,
discussions are also in the works to acquire existing third-party businesses in
markets outside the Caribbean in tough-to-crack markets like Mexico, Colombia,
Peru and Chile. “We’re most interested in finding opcos that are like-minded
and use an SAA strategy (strategic alignment agreement) for those,” Register said. “We’ve already had
discussions with some about possibly joining forces… A third phase would be to
look at Brazil and Argentina, which are much more complicated.”
The opportunity to do portfolio deals and Hotel Equities’
dry powder is what Register said attracted him and Millard to this deal. “But
these deals will have to make economic sense and be a cultural fit, and it’s hard to find companies
that meet that criteria,” Register said. “But there are some down there and we’ve
already sorted preliminary discussions with some of them.”
Reardon said
they are taking a similar approach in CALA that they did to grow in Canada
where in 2016 it assumed management for two hotels and now has 44 hotels
supported by a corporate team that supports almost 700 associates.
“We looked at the CALA opportunity long and hard through our
HR lens, our political lens and went out to our brand partners, who welcomed us
with open arms and said, ‘come on in, we’ll help you guys,’” Reardon said. “And
the Trust guys are amazing and have relationships we could never think of
having.”
Reardon confirmed Register’s comments about operating platform
deals, saying discussions are ongoing “that will help us add instant credibility
to our growth.”
Deal background
The deal came about when Register and Millard finished their
contract with Highgate and were trying to figure out how to get back doing what
they knew – developing and operating in the Caribbean and Latin America, where there are not
a lot of U.S.-based management companies with a strong commitment.
We’ve been working down there for 20-plus years and are very close to a number of hotel owners. So, we met and within a couple of months put a deal together. We are now an extension of Hotel Equities and have some big ideals and goals for expansion in the region.
Michael Register
“We connected with the Hotel Equities guys, who were targeting the region,” Register explained. “We’ve been working down there for 20-plus
years and are very close to a number of hotel owners. So, we met and within a
couple of months put a deal together. We are now an extension of Hotel Equities
and have some big ideas and goals for expansion in the region.”
When deals are signed, the Trust team will be involved
providing expertise like F&B to all properties and provide owner relations, while Hotel Equities will act as “the mothership” providing all back office support, according to Register.
“As we grow, we will hire more CALA-specific and focused
personnel… We are not going to create a separate company but we’ll use the
backbone of Hotel Equities and fill in as needed,” Register added.
In closing, Register said the new partnership could be very
significant in short order if it can close the portfolio deals. “I think will
be very significant within 12 months in the Caribbean, and then penetrating
Mexico and Colombia, Peru, and Chile is a little tougher,” he said. “It can be done
organically, but obviously the preferred route from a time perspective and
cultural expertise is to find the right operating company.”