Experience and drive behind a four-property shop that thinks
the timing is right to get out of the shadows of the bigger investment firms.
NEW YORK CITY – Behind some of the big private equity shops
are smaller but disciplined and driven investment companies targeting the
acquisition of first-class assets in the U.S. One such emerging player is Reade
Hotel Capital, led by CEO Mark Rosinsky and Managing Partner Lawrence Margolis,
who since 2021 have acquired four hotels with 802 keys and are actively
pursuing more deals.
“We think this is uniquely a good time to buy and we think a
lot of people aren’t buying right now,” Margolis told Hotel Investment Today at
the recent NYU hotel investment conference. “We’re looking to get out from the
bigger shadow of some of these other shops and be among the names mentioned of
very serious players.”
Rosinsky is a life-long hotelier, having spent several years
as a founding member of HVS, then with HEI Hotels and Resorts and in 1997 partnered
with Murray Dow to co-found The Dow Hotel Co. Margolis’ career has solely
focused on real estate and finance. At Franklin BSP Realty Trust, he was
involved in the origination and underwriting of real estate transactions (over
$1 billion) significantly dealing with hotels. Previously, he worked at Cushman
& Wakefield in their Hospitality Group where he advised and authored
appraisals for hotels.
“I have the experience, he has the drive,” Rosinsky said.
And it started at the end of 2021 when they bought two
Hampton Inns in the Hudson Valley of New York. They renovated both properties
from top to bottom (about $45,000 per key) and today Rosinsky said they are
doing very well.
For example, the Hampton Inn Harriman Woodbury was acquired
in 2021 from a local owner-operator and sourced through off-market channels. Reade
saw an opportunity to turn around net cash flow via a PIP and applied intense
asset management practices to ensure execution and accountability.
In the first year under ownership and management (they
manage their own assets through Reade Hotel Management), the hotel saw a substantial
increase in RevPAR and net cash flow.
More recently, Reade bought a 320-key full-service Hilton by
the airport in New Orleans. They finished a renovation last October and report
it is doing very well.
In mid-April of this year, they bought the Embassy Suites in
Nashville by Vanderbilt University and are in the middle of implementing a
$45,000 per key renovation.
Stated strategy
Reade generally brings in investment partners (a Japanese
family office is an investor) on their deals and they try to lean into deals where
the market is pulling back a little bit.
“It helps us be more competitive in what’s already a very
saturated market,” Margolis explained. “So, if we can avoid going up against
the Blackstones and the Apollos of the world, we would like to do that. That
sometimes entails working a little bit harder to find more off-market
transactions to add value to deals where we’re not just buying a down-the-middle
Courtyard in Charlotte, North Carolina, for an 8 cap and just
saying we’re going to manage it better.”
The twosome said the biggest value-add they bring to the
table is the renovation component. “We always have some sort of value-add
strategy, but we buy on good in-place deals,” Margolis said.
We’re looking to grow, but with the right deals. That specific profile includes good in-place cash flow – a strong performer that needs a big renovation.
Mark Rosinsky
Reade’s strategy will continue to be opportunistic – they will
sell when the market tells them to sell, but at the moment they are definitely
net buyers. “Right now, the market isn't so ripe for selling certain types of
assets that we currently own,” Margolis continued. “So, if we decide to hold, the properties are doing really well, and the debt market is pretty favorable.
We can just take it out with either flexible debt or there’s a lot of options
with capital right now, which is good.”
Reade is working on several new deals now, and think they
have a competitive advantage by having been active in the market when so many
others have not transacted for several years. They expect to close one to three
more deals this year and are working on one deal for an asset with more than
1,000 keys.
“We’re looking to grow, but with the right deals. That
specific profile includes good in-place cash flow – a strong performer that
needs a big renovation,” Rosinsky said.
“We’re very committed to the business,” Margolis continued. “We
take a boutique approach to some more institutional assets. It’s great that
some of these bigger PE firms have an analyst team of maybe 15-20 and take a
different approach than we do. We are very hands-on with the renovations, with
the operations, the revenue, costs. Everything that we do, from top to bottom,
we have the full scope, which is why we like to manage these assets, as well.”
The corporate organization has only about a half-dozen
people, including COO of the management company Steve Falciani, and Reade has
hired a search firm to grow because based on current uncertain market
conditions they believe the timing is right to buy.
“These conditions create an opportunity for the people that
are active,” Rosinsky concluded.