Why exiting Miami investment early made sense for Certares

Editor’s note: This is part one of a two-part interview with Nolan Hecht, senior managing director and head of real estate for Certares. Part two, which will run later this week, will focus on Hecht’s current read of the hotel deal market and why he’s optimistic about the next 12 months.

NATIONAL REPORT — In the mid-1990s, at Cornell’s School of Hotel Administration, two of the biggest current names in hotel investment were seated next to each other, as if almost by fate (or in this case, the alphabet).

“There’s a famous lecture at the hotel school called the Dean’s Distinguished Lecture Series, and they seat you alphabetically. So, by happenstance (Hehir and Hecht), we were next to each other,” said Nolan Hecht, senior managing director and head of real estate for New York City-based Certares, speaking about his industry colleague Sean Hehir, president and CEO of Honolulu-based Trinity Investments.

Hecht noted it was an interesting pairing.

“Sean’s from Botswana and I had no idea where that was, and I was from Cleveland and I’m sure Sean had no idea where that was, but we became friends and we stayed in touch,” he said, noting the pair first collaborated (when Hecht was at a different company) on a deal for The Ritz-Carlton Maui Kapalua in 2016 that a eventually sold to Blackstone.

Hecht, Hehir and Blackstone had a full circle moment last week as the trio was involved in another transaction: on September 10, Certares and Trinity announced the sale of the 352-key East Miami in Florida to Blackstone for an undisclosed amount (Bloomberg report said the property could be valued at more than $325 million).

Trinity and Certares acquired the hotel in 2021 from Hong Kong-based Swire Properties for $174 million. The hotel opened in 2016 and anchors the $1.1 billion Brickell City Centre in Miami.

“We were both separately chasing the East in Miami, and we said that we worked great together on the Kapalua deal, so let’s not compete. Let’s do the East together,” Hecht said. 

Certares launched its real estate platform in early 2021 (it’s acquired 16 hotels since) and Hecht said the opportunity was too good to pass on.

It was a chance for us to mint an exceptional return for our investors. That asset is still on a positive trajectory and it’s one of those transactions that I think was a win-win for both.

Nolan Hecht

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“It was a chance for us to mint an exceptional return for our investors,” he said. “That asset is still on a positive trajectory and it’s one of those transactions that I think was a win-win for both.”

Hecht said the business plan for the hotel had been completed and the owners had almost doubled the NOI since the acquisition. So, the timing was right in what can be a difficult market to sell a hotel.

“Assets are difficult to sell right now,” he said. “Florida would be one of the markets that is still getting investors to sharpen their pencils and getting them off the sidelines to buy assets… When you look through our portfolio and what was ripe to sell, [selling the] East Miami a year early on our hold period that we underwrote [made sense].”

While Certares is exiting Miami in the sale, Hecht said the company is still bullish on the market, especially the Brickell area.

“When we were starting the platform in 2021… we had a thesis that leisure travel was going to return first, coming out of the pandemic,” he said. “We started looking at Miami Beach, but we couldn’t find any value. We thought assets were overpriced and it was getting too much attention.”

So, Hecht said Certares, which owns a multitude of travel-related companies and is able to leverage that data with its investments, started looking away from the beach in Miami. It found a “pocket” neighborhood that got the company’s attention.

“What we found through our research was this pocket of Brickell where all the young professionals were moving. It was where high-end office space was starting to get developed,” he said, noting that the transformation today is nothing short of exceptional.

“As we drilled down, we said this is the area of growth in Miami we want to be in,” Hecht said. “We timed it very well. If you go to Brickell today, you will see all the cranes up. You see the apartment development. The rent at 830 Brickell, which is adjacent to our hotel, is over $100 a square foot. As Miami has become a second epicenter of finance in the U.S., kind of a 1B to New York, which I think is still 1A, Brickell has become the hub of finance and you just see the flow of business and residents there.”

Certares and Trinity partnered in August with Trinity selling a majority stake of the Hyatt Regency Greenwich.

Partnership on Hyatt deal

Earlier in August, Certares and Trinity partnered again, this time with Trinity selling a majority stake of the 374-key Hyatt Regency Greenwich in Connecticut to Certares Real Estate Management for an undisclosed amount. 

Sean Hehir told Hotel Investment Today at the time that after Trinity executed on the renovation of the property, it became a perfect time to recapitalize to a capital partner (Trinity kept a 25% equity stake in the property and will continue to be a general partner and still operate the hotel). He said he would love to partner with Certares on more deals as they “see the world in a similar way.”

Hecht said he thinks what makes the Certares-Trinity partnership work is that they have complementary skill sets, although their target properties often aren’t the same.

This hotel, in a very short period of time, has become the leader in both corporate and social group… We don’t buy suburban assets, but when you look at the composition of this hotel, I call it urban-suburban because you have a corporate base there.

Nolan Hecht

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“We’d love to do more with Trinity. We tend to chase different assets,” he said. “They like super large assets that have typically heavy renovations and turnarounds. We tend to play with a little bit smaller assets, maybe less heavy construction or renovation. But from time to time, we try to do things together, and the organizations fit perfectly.”

Hecht admits he had a hometown advantage with the Hyatt Regency Greenwich because he lives near the area, noting it’s one of the most affluent markets in the country and home to many Fortune 500 companies, including Pepsi and Mastercard.

“Yet, what I saw during COVID was a bunch of the big hotels closed,” he said. “I got really excited when Trinity was renovating Greenwich, because you had supply coming out of the system and you had this brand-new, renovated hotel. It’s really the only game in town from a quality standpoint… This hotel, in a very short period of time, has become the leader in both corporate and social group… We don’t buy suburban assets, but when you look at the composition of this hotel, I call it urban-suburban because you have a corporate base there.”

Hecht said he was also excited for Certares to acquire a Hyatt property.

“It’s a perfect partnership… and it’s our first Hyatt. If you look at the composition of Certares, we’re about 40% Hilton, 30% Marriott and we’ve wanted to be in the Hyatt family. Hyatt has always been very strong on the group side. So, we’re delighted to finally be Hyatt owners.”