The merger of Scarlett Hotel Group and Everwood Capital Partners gives
the companies a portfolio of 17 hotels with over $500 million in asset value.
Here’s why they expect those numbers to grow rapidly.
CHICAGO and ORLANDO — When the leaders of Scarlett
Hotel Group and Everwood Hospitality Partners started talking about merging,
they said it was clear that their visions and goals were in alignment. One of
the biggest goals was to grow — with the key phrase “50 by 50.”
That
goal started with the three founders of Chicago-based Scarlett Hotel Group — principals Zio Pekovic, Rob Sadoff and Andrew Scarlett, who wanted to get to
50 hotels owned or managed by the time they were 50 years old (roughly 6-8
years from now.) That concept also worked for the trio of Everwood principals — CEO
Amit Govin, COO Amit Patel and President Sanjay Rama, whose ages roughly match
the three from Scarlett by a year or two.
So,
the growth path is set for the merged entity, which now counts 17 hotels owned
and managed, with nine in the pipeline over the coming year (about 30% of them
are ground-up while the rest are existing assets).
Hotel
Investment Today talked to Pekovic, Sadoff and Patel about the merger and what
it means for the future.

It allows us to underwrite a deal and have some confidence that our operations will be able to prove the underlying underwriting at the end of the day. That allows us to make faster decisions on acquisitions and development.
Amit Patel
The
partnership plays to both companies’ strengths. Scarlett is now managing the
hotels (Everwood had nine of them, and Scarlett onboarded them by the end of
2023), while Everwood is rebranding to Everwood Capital Partners and will focus
on investment, development, and capital deployment.
“When we started talking with Scarlett, it looked like a lot of our vision and
goals were aligned as their shop was focused on management but also very active
on deals and development. So, a lot of the synergies between the three of them
and the three of us aligned,” Patel said. “The partnership really worked out in
the sense that they would continue to do the operations arm, and that allows
Everwood to go back and focus on the real estate in the private equity side of
the business and be able to continue to acquire complex, structured deals… This opens the field up for us collectively to do hospitality and a few other
asset classes.”
Pekovic
said the merger allows Scarlett to continue to add on operationally. “An
important part of the merger was also bringing on two executives from Everwood,
specifically to support revenue management and sales and marketing for all the
assets,” he said.
The combined hotel portfolio
Pekovic
said the hotel portfolio is valued at just over $500 in asset value (with the
InterContinental San Antonio making up $156 million) and is a mix of
limited-service, full-service, and lifestyle hotels. The companies said they
own all their assets but aren’t opposed to joint ventures, especially for new
construction.
“Operationally,
our team (Scarlett) has tremendous experience with limited-service assets,”
Sadoff said. “So, it works well because of the blended portfolio company’s
full-service and lifestyle assets.”
The
first one coming down the pipeline is a renovation of the 176-key Best Western
Premier Waterfront Hotel & Convention Center in Oshkosh, Wisconsin, is being converted to a full-service Marriott property and will launch this summer. Scarlett purchased the property last April.

A meeting between the two companies.
Patel
said the partnership allows the companies to return to their pre-COVID path. “The
merger allows and helps everyone’s perspective because our prime focus
pre-COVID was this trajectory of continuing building assets via development and
acquisitions,” he said.
Patel
said the merger allows Everwood “to breathe a little bit better” because it
isn’t focusing on operations. He said there were times when Everwood couldn’t
pursue all the deals it wanted to because of bandwidth. “It
allows us to underwrite a deal and have some confidence that our operations
will be able to prove the underlying underwriting at the end of the day,” he
said. “That allows us to make faster decisions on acquisitions and development.”
The
companies are funded through wholly owned capital sources or through “friends
and family” investors and pre-existing relationships with retail investment
funds that would follow them depending on the asset class or size of the deal.
Growing the portfolio
Patel
said the merger also allows Everwood to expand the deals it pursues from
individual assets to possibly a portfolio.
“We have a trusted management arm and trusted partners who have a track record and
the ability to be able to take on the management, whether it’s an asset by
asset, or if we’re looking at portfolio opportunities for purchasing. We have
the combined infrastructure now to plug in five or 10 or 15 hotels
if we were to go out and seek a portfolio,” he said.
Pekovic
said the merger also allows the companies to focus on a larger deal size, above
what a regional player could do but below what a pure institutional investor
might seek.
“If
we’re able to focus on acquisitions that range anywhere from $20 to $75
million, that drives our growth,” he said. “We’re now able to focus on higher
price deals and be a lot more competitive in that sweet space, just below the
larger institutions that want to do north of $75 million and just above some of
the more regional players who are focusing in that $10 to $20 million range.”
Sadoff
said those sizes of assets can also deliver better top-line revenue in terms of
performance expectations.
“From
a top-line gross revenue standpoint, those specific assets are probably 2.5x to
3x what a traditional limited-service would do,” he said. “So, that accelerates
our revenue growth because those hotels are now within our reach and
obtainable... It’s hard to say an aggregate number for tackling growth from an
operations standpoint on the hotel side, but it will rise exponentially because
of our capacity to do those deals.”
“Market-tunistic” on where next
Pekovic
said the companies have historically bought assets from institutional investors
and “squeezed where we can” to drive top-line growth.
Most
of the assets are in the Midwest and Southeast, including Texas, but Pekovic
said they are “market-tunistic” about where to grow next. “We’re
not necessarily focused on a particular region; it’s more about the opportunity
and whether that market is an opportunity.”
Sadoff also said they have looked for deals with a good story. “Generally,
those come with interesting story or background, and that actually makes for an
interesting acquisition,” he said. “And that story generally leads us to find
the value.
“The
older, generally cookie cutter acquisitions for us, they may have a little hair
on them… and they may be a smaller asset owned by a large institution that we
feel has not gotten the attention it deserves, or the opportunity lies to grow
that top line and shrink that expense. We like those kinds of things.”