For public-private project leader, persistence, patience pay off

DALLAS — Matthews Southwest Hospitality is a leader in the “P3” space (public-private partnership), but president Mike Garcia said to be successful, a few more “Ps” are required.

“It’s really the persistence and the patience to have enough of these so that one is going to go while you’re still working on the others that might take more time.”

The Dallas-based company, which has had a long, successful string of P3 projects in its past, is a division of Lewisville, Texas-based Matthews Southwest, which has also been a leader in public-private partnerships.

The 800-key Omni Fort Lauderdale is scheduled to open in 2025.

Matthews Southwest Hospitality currently has projects in different stages of development in Colorado Springs, Colorado; Broward County, Florida; Savannah, Georgia; and Calgary, Alberta, Canada, to name a few.

Garcia was formerly chief development officer for Dallas-based Omni Hotels & Resorts (also a leader in the public-private space) and worked with Matthew Southwest President Jack Matthews on several projects, including developing the $500 million Omni Dallas Convention Center Hotel project in downtown Dallas. In 2017, he started Matthews Southwest Hospitality along with Matthews and Dave Snell.

We talked to Garcia about the ins and outs of P3s, what he learned about starting a new brand called CANVAS, and the status of the company’s many projects across the country. 

The different ‘P’s’

When asked why Matthews Southwest Hospitality is a leader in the public-private partnership space, Garcia mentions even a few more “P” words. 

“It’s the ability to get along with people. Listening is number one, namely to the government entities you partner with,” he said. “You have to figure out what’s important to them and what’s important to the community. If you miss that, you don’t make them feel important because they are very important to this because they are your partner. Sometimes, a lot of people don’t think that way. But that’s how we think.”

Garcia said the appeal of these public-private partnerships is the lasting impact they can have.

“They are usually lasting changes to the community. That’s what we like about them. You have a positive impact, whether it’s the Omni Dallas, which changed that side of downtown, or the Omni Fort Worth. When we built that hotel, there was surface parking there.”

But the work on P3s isn’t fast-paced. “There can be a lot of stops and starts to these… Plus, you’re very dependent on the political will at the time,” Garcia said.

That can mean dealing with elections or leaders wanting to ensure they get credit for the project. Many projects get pushed back.

When you’re talking about projects that are 800 rooms and $600,000 a key, you’re talking about massive amounts of savings by going to this tax-exempt model, which allows the cities to get something else done.

Mike Garcia

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“You thought you were going to get it done, and then it gets delayed because a new leadership team wants to reassess the environment and reset priorities, and then maybe they come back to it in two or three years,” Garcia explained. “Then you get a call, and they say, ‘Hey, we’re thinking about doing this again.’ That’s not uncommon.”

Matthews Southwest Hospitality is primarily a developer but does own some of its properties in Dallas-Fort Worth, including a new hotel brand it created in 2019. It can also invest some equity in some of its public-private projects, like in Colorado Springs, where it owns some of the bonds.

But on most of these projects, the company primarily makes money on a fee basis.

“It’s basically a percentage of construction costs (hard costs), and depending on the contract negotiated, there can be an incentive to finish early. Conversely, there can be a penalty if you finish late,” Garcia said.

He said the company doesn’t typically like to tie it to a budget. “To me, it should be more about time than budget because budgets can flex during the whole process.”

The company does project management in-house and will add teams on-site as necessary.

“Once the construction gets going, it’s up to us,” Garcia said. “That means part of our job is to get it done and keep them on time.”

Financing for tax-exempt projects can also be different from a traditional mortgage (as much as 300 basis points), especially in today’s lending environment.

“When you’re talking about projects that are 800 rooms and $600,000 a key, you’re talking about massive amounts of savings by going to this tax-exempt model, which allows the cities to get something else done,” Garcia said.

He added that the public-private model can also make a huge difference in funding projects compared to a private equity model.

“Most of these projects require some kind of subsidy or incentive from the cities, and the higher the interest rate, the larger amount of money for that subsidy that’s going to be required to get the deal done,” Garcia said. “When you get a lower interest rate, that brings the gap requirement or incentive down for this kind of project, making them more doable.”

Building a new brand

While Matthews Southwest Hospitality specializes in public-private partnerships, it’s not the only hotel work it’s doing. Hotel Investment Today interviewed Garcia in the lobby of its 76-key CANVAS Hotel Dallas, a new brand it started in 2019 from a former NYLO hotel just south of downtown.

The first Canvas hotel opened in 2019

The lifestyle hotel is in the upper-upscale space, and it came from the company’s desire to start its own “blank canvas” brand.

But Garcia said starting a new brand is easier said than done. “I could kick myself for saying, ‘Why don’t we do it?’” he said. “It’s crazy, but it’s turned out really well.”

Garcia said the company wants the brand to grow (he would love to have 5-10 in the next five years), first in Dallas-Fort Worth and then in Texas, and it will put equity behind that growth.

“In terms of growth, if we’re putting equity in, right now, DFW is just easier,” he said. “We have an equity position, and we certainly want to be able to oversee it. Texas would be our next focus outside of DFW.”

A resort property in DFW

Another project where Matthews Southwest Hospitality has a 100% ownership stake is The Tribute Lakeside Resort in the DFW suburb The Colony, which is adjacent to fast-growth suburbs like Plano and Frisco, which are drawing many high-profile corporate residents as well as thousands of other residents each year.

The Tribute Lakeside Resort in The Colony, Texas, opens in a few years.

The company has long owned the land, which has a 1,600-acre master planned community for more than 2,000 homes at buildout, as well as 36 holes of golf. It’s a passion project for Matthews and is envisioned as an upper-upscale resort with cottages, trails, water, plenty of meeting space for retreats or weddings, a spa, and a heavy wellness component.

“Jack’s [Matthews] always had a vision,” Garcia said. “He had a vision as far back as when I was at Omni and as far back as when we were working on the Dallas hotel because he drove me out there and said, ‘I want to build a hotel out here.’ It’s a different place than what it was then, and I said, 'You know, Jack, maybe someday.’ So, when I came on, he said, ‘Can you look at this again for me?’

“We started doing the analytics, and with all the businesses that have come up a short distance away, and with its beautiful setting it’s going to be wonderful. There’s nothing like that in [DFW]. I’m not quite sure there’s anything like that in Texas.”

Other projects

Broward County Hotel & Convention Center expansion. Garcia said the hotel portion of the project in Florida is still under construction and scheduled to open in 2025. Construction of the convention center expansion portion of the project, which is 100% owned by the county, continued during COVID because Florida deemed it essential. Still, the 800-key Omni Fort Lauderdale Hotel construction was delayed because of the pandemic.

Rendering of The Hotel Polaris at the Air Force Academy

Hotel Polaris at the Air Force Academy. The 375-key hotel in Colorado Springs, Colorado, is scheduled to open later this year, and Matthews Southwest Hospitality holds bonds for the project. The upper-upscale hotel is located just outside the security gates of the Air Force campus. Garcia said the hotel will not only serve the Air Force Academy but also a large transient component of the Colorado Springs area.

BMO Centre Convention Center in Calgary. Matthews Southwest Hospitality is partnering with the Calgary Municipal Land Corporation (CMLC) and the Calgary Stampede to expand the BMO Centre and build a 220-plus-key convention center hotel in the Canadian city’s Culture + Entertainment District (where they are also building a new stadium for the NHL’s Calgary Flames). Matthews will have a small equity stake (10% or less) in the project.

Savannah Convention Center hotel. Matthews Southwest Hospitality is co-developing with Atlanta-based Songy Highroads a $200 million, 400-key hotel next to Savannah, Georgia’s, newly expanded convention center. The project is still in the pre-development stages, and Matthews could own bonds in it once it moves ahead.

Indianapolis Convention Center Hotel and expansion. Matthews is also serving as a consultant (to help through the development process) for the Capital Improvement Board of Managers of Marion County, Indiana, on the $625 million project, which will contain an 800-key Hilton Signia hotel.