Experienced dealmaker who has partnered with Paul Whetsell
to represent and advise owners and operators talks all things deals during NYU.
NEW YORK CITY – “Friends hanging out together with a
purpose.” That’s how David McCaslin describes his advisory work with
contemporary Paul Whetsell at CapStar Advisors. Their combined experience and
big reputations led them most recently to represent Springboard Hospitality in
its strategic merger with Hotel Equities. They also completed a strategic
growth plan for Brightwild, a branded vacation rental company based in Key West
Florida.
McCaslin said CapStar represents firms looking to sell,
merge or recapitalize, often times where the principals are approaching
retirement or decide to focus on other career opportunities. For instance, it
also represented Sightline Hospitality when it merged with The PM Hotel Group.
You can’t put yourself in a position where you have to sell at a given point in time. That may not be prudent… and that’s what usually trips people up – they don’t have the capacity to hold.
David McCaslin
They have actively marketed and finalized the sale of
small-to-medium size companies, sourced and negotiated merger and acquisition
opportunities, introduced capital partners, reviewed multi-property and
individual asset sales and purchases, deep value-add renovations and corporate
restructurings.
What the two industry investment veterans bring to the table
is savvy and expertise on the operations side, as well as with sales,
investment, M&A and strategic planning. The company traces its roots
to the original CapStar Hotel Co. and its subsequent growth into MeriStar
Hospitality Corp. and MeriStar Hotels & Resorts and later Interstate Hotels
and Resorts.
The duo also brings a lot of perspective to the table and for
that reason Hotel Investment Today sat down with McCaslin at the NYU investment
conference to get his take on hotel investment issues and opportunities of the
day.
Hotel Investment Today (HIT): Brands are making money. Management
companies are making money. Owners right now – not so much. What’s the way
forward for investors?
David McCaslin: If you take it as a snapshot in time, real
estate investment business is still a great business, but you really have to
have staying power. You can’t put yourself in a position where you have to sell
at a given point in time. That may not be prudent… and that’s what usually trips people up – they
don’t have the capacity to hold.
So, I believe it’ll be a ‘stock pickers’ market. I don’t believe it’s the time to just rush in and buy everything that moves, but I do think you’re going to find good deals.
David McCaslin
HIT: When will deal activity start to pick up?
McCaslin: There’s been very little activity for a couple of
years. During the last couple of downturns, the market didn’t have a lot of
forced activity because the government told the lenders to sort of cooperate
and not crash the economy. But when you get to the point of where the economy
itself is not at risk, the lenders will become more aggressive because they
have to protect their own proprietary interest...
I actually think there’s going to be a real estate rush in
the next couple of years primarily because there’s been a backlog of what’s
been there. So, it’s not because it’s some great economy. It’s just all this pent-up
normal cycle demand of trading out… When owners get to a point where they
believe they can, they’re all going to head for the exists… The strange thing
here is there’s a lot of equity on the sidelines, which usually means prices
get bid up and is actually great for the seller, but bad for the investor.
Interest rates are probably still high, and I do think they
will come down a hair. Traditionally we’re not at a crazy number but people
that are younger got seduced by super low interest rates. I don’t think those
are coming back.
To get deals moving, I think they still have to sort of 'work,' and the fundamentals are still about whether or not the assets are in the
right markets and if the boxes are connected to a good brand.
Today, I think everybody’s in sort of an investment paralysis. They don’t know what the rules are going to be next week.
David McCaslin
So, I believe it’ll be a ‘stock pickers’ market. I don’t
believe it’s the time to just rush in and buy everything that moves, but I do
think you’re going to find good deals. In general, I don’t think you’re going
to get hurt, but nobody really wants to buy real estate and sell it in seven
years and have a 3% or 4% return.
I think it’s essentially a stable bet that groups will still
meet, individual business travel will happen, and leisure travel will happen. Then
it just becomes a market share game. Am I a little better product, a little
better at marketing?
HIT: All that said, the market has still not picked up.
McCaslin: People don’t like uncertainty. I believe somewhere
by the fall, there will be a tariff thing. I have no idea what it will be, but
it’ll be established. There’ll be a tax bill, or something that will be
established. Interest rates will be more predictable. There’ll be consensus as
to what the Fed will do.
So, when you have more certainty, and even though people may
not even like the rules, they will react because they know what they are. Today,
I think everybody’s in sort of an investment paralysis. They don’t know what
the rules are going to be next week.