New CIO England boosts TMGOC trajectory

Having strategized successfully since launching four years ago, private equity firm TMGOC Ventures is heading comfortably into 2024, having recently crossed a $1-billion investment threshold of owned and under-development projects, primarily in hospitality.

The financial benchmark is nothing less than what the co-founders of the enterprise considered possible in 2019. The joint venture was crafted by Charleston, South Carolina-based The Montford Group’s Founder and CEO Sunju Patel and Boca Raton, Florida-based Opterra Capital’s Founder and CEO Glenn Alba (TMGOC is an amalgam of their companies’ names). The duo wanted a firm that would serve investors, capital markets, debt partners and investors, and was “intentional and deliberate” in selecting partners and projects.

Being strategic has yielded a portfolio of 24 domestic properties. Seventeen projects are open, 13 of which are hotels and all are third-party managed. A half-dozen other projects are in pre-development, and one is under construction (multi-family and commercial projects are included).

Rendering of the Tapestry Collection by Hilton in Macon, Georgia

TMGOC has several projects in the pipeline: Moxy by Marriott in Uptown Charlotte, North Carolina; Tapestry Collection by Hilton and the Central City Commons mixed-use development that includes 233 multi-family units, a 500-space parking deck and 6,500 square feet of retail in Macon, Georgia; a 191-key Thompson by Hyatt in Charleston, South Carolina; the 150-key The Montford, Autograph Collection with 23 residences in Charleston, South Carolina; and a just-announced adaptive reuse of office space in an historic building to a 104-key Ritz-Carlton with 20 residences in Savannah, Georgia.

TMGOC has no intention of slowing down. Toward this, Alba and Patel earlier this year decided to execute on another strategic investment, creating the first chief investment officer (CIO) position within TMGOC.

In June, the executives tapped Krystal England to fill the post. Most recently managing director for Canyon Partners Real Estate in Los Angeles, she was responsible there for originating, structuring and closing hospitality and mixed-use real estate investments, as well as overseeing the asset management of the firm’s hospitality investments.

England also collaborated with Alba and Patel on various projects in the past, which she indicated made the move to TMGOC appealing.

In short order, the CIO introduced new preferred equity and rescue capital offerings, and has seen strong interest, whether it’s for acquisitions, cash-in refinancing, loan paydown or property improvement completion. “Additionally, we’re seeing an increased desire from our investors to provide this type of capital, particularly if they’re taking a more conservative position in their real estate portfolios, as it has a very attractive risk-adjusted return profile,” she said.

The right mindset

In pioneering the CIO position, England said there are two primary functions on which she is focusing. “As our portfolio continues to grow, it is essential that we coordinate efforts among the entire team to ensure we’re moving all projects and new opportunities forward and on time,” she said. “The second, but also important function of my role as CIO, is to bring both a lender and investor mindset to how we look at new opportunities and talk about our portfolio. My institutional background is a great complement to Glenn and his tenure at Blackstone in this respect.” (Alba spent 20 years with Blackstone Real Estate, serving as head of global portfolio management and led the asset management of the firm’s hotel investments in the United States.)

Rendering of the 104-key Ritz-Carlton with 20 residences in Savannah, Georgia

TMGOC Ventures has shown rapid growth and success since launching, despite the ensuing several years of coronavirus chaos in hospitality. In characterizing the company in terms of how its existing portfolio is performing, England noted its concentration of properties in the Southeast has allowed TMGOC to benefit from the post-COVID migration and business focus to the area, citing Florida in particular.

“Our geographic footprint and relationship with our investors put us in the position to continue growing despite the challenges the pandemic brought to the industry. This allows us to be selective and active, even in a climate of high-interest rates, insurance rates and overall operating-expense growth in the portfolio,” she said.

England added that TMGOC’s strong team of asset managers, combined with deep relationships in the industry to source opportunities, enables it to pursue new transactions in a proactive and creative way. “We recently expanded the asset management team earlier this year to position the firm to further refine our portfolio operations, manage expenses and continue creating value for our investors.”

Macros benefit strategy

From a macro perspective, England has an interesting take regarding any impact on proposed projects due to escalating interest rates, inflation and what’s been called a “whiff of recession.”

The existing macro environment actually provides an opportunity for conservatively underwritten and well-capitalized development projects. We’re undertaking construction while many are backing off, and the development pipeline nationally is shrinking. This puts us and our investors in an extraordinary position to deliver new products in the future at a time when new openings will be scarce.

Krystal England

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“I believe the existing macro environment actually provides an opportunity for conservatively underwritten and well-capitalized development projects. We’re undertaking construction while many are backing off, and the development pipeline nationally is shrinking. This puts us and our investors in an extraordinary position to deliver new products in the future at a time when new openings will be scarce,” she said.

Asked how easy or difficult is it to get the types of developments in their pipeline finished, the CIO acknowledged, “No development project is ever easy. That said, local and industry relationships are key to success in the geographies where we source opportunities – this ‘groundwork’ is a particular strength of Sunju’s. These relationships are essential for entitlements, permitting and obtaining final approvals.”

From an investment perspective, England noted “there are construction financing challenges as well as rising construction costs overall, but we do see those costs beginning to abate as we head into 2024,” she said.

As two of the planned projects have residential components, when adding these, England said TMGOC evaluates what makes the most sense for each development site.

“When adding a residential component, you need to design by acknowledging two different groups of users in mind: residents and guests,” she explained. “Financing a mixed-use project is always going to be more complex, but for the specific projects for which we have residential slated—both are in pre-development—the Ritz-Carlton in Savannah, and the Autograph Collection in Charleston, the appeal of serviced residential offerings in each of these markets is evident.”

In hitting that $1 billion benchmark, TMGOC has done a lot of development and co-founders Alba and Patel indicated the company is setting its sights on more opportunities that include ground-up development and acquisitions.

According to the CIO, the company has a track record in acquiring hotels, with typical acquisitions in the select-service tier. “These properties are a good fit for the portfolio because of our ability to create value via enhanced revenue and expense management or a renovation to the property, and in some cases, both,” she said.

England added TMGOC was fortunate to have investors in its development projects that have a long-term perspective and horizon, which allows the company to take advantage of opportunities, regardless of short-term market conditions. “As we head into 2024, in terms of our interest in acquisitions, we continue to evaluate opportunities to grow the portfolio in select-service and full-service properties in the Southeast and expand west into Texas and the Southwest,” she said.

As to any lessons learned that she’s layering onto the CIO post, England observed: “Coming from an institutional background, you learn you can never ask too many questions with respect to a new opportunity. I’m always trying to think not just months, but years in advance to not only maintain a level of optimism and confidence about projects overall but also understand and acknowledge the risks that might arise.”