Believe the Hotel Hype
With uber-cool projects like Soho House Chicago and Virgin Hotel Chicago, the city’s lodging pipeline has never been more robust and diverse. Burgeoning new neighborhoods and boutique brands abound, which is why we’re hosting Bisnow’s Hotel Investment & Repositioning Summit on Dec. 17 at The Westin Chicago River North, starting at 7am. Meet some of our panelists:
The Triplex: Jason Friedman
In addition to a cool superhero name, the triplex at 515 N Clark St in River North is Friedman Properties’ latest hotel masterpiece, president Jason Friedman tells us. Open for just over a year, the 664-key project (managed by White Lodging) includes Aloft (below), Fairfield Inn & Suites and Hyatt Place. Maxing out density maximizes the value of the dirt, Jason says. Rather than struggling to build one massive limited- or select-service hotel, Friedman split it into three brands, successfully attracting a wide range of consumers. Lettuce Entertain You’s Beatrix in Aloft’s lobby has been a big help in driving business, a great example of restaurant/hotel symbiosis, he tells us.
A busy hotel pipeline has developers looking for viable sites in new neighborhoods, but Jason’s happy as Mr. River North. Friedman is biding its time, he says, concentrating on areas that offer both business travelers during the week and leisure travelers on weekends. Millennials are pushing down hotel room size at the latest limited- and select-service concepts, but their highest priority is a vibrant neighborhood near both work and play. The biggest challenges remain getting your development ducks in a row, Jason says, from financing to entitlements and zoning. Jason ran the marathon in October (his time was 3:28), and his team raised almost $100,000 for the JUF.
The Glass-Half-Full Guy: Nir Liebling
Ultima Hospitality CIO Nir Liebling, just back from vacation in Mexico, says it’s a good time to be a hotel owner. Fundamentals are solid, the debt markets are packed and interest rates are cheaper than anyone could have dreamed last year. But if you’re competing on deals, good luck. While the firm is actively looking in the Chicago market, it’s had some hesitation. There’s so much supply, union labor sends fixed costs for operating hotels here way up and it’s a very seasonal market given our brutal winters, he tells us. Ultima owns a Double Tree in Skokie, but recently it’s made buys in the Bay Area and Boston.
Next year the firm plans to maximize value, refinance, recapitalize and explore dispositions across the $250M of national hotel product it acquired over the last two years. Ultima plans to acquire about $150M in ’15, most likely within the top 10 MSAs. Financing continues to improve (CMBS is common for stabilized and balance sheet lenders for value-add), Nir says. Good real estate with good cash flow or decent sponsorship, branding and a business plan can be financed in the 4% range with around 70% LTC. Getting 8% cap rates this deep into the cycle means positive arbitrage with a value-add plan, he tells us. To hear more, please join us for Bisnow’s Hotel Investment & Repositioning Summit on Dec. 17 at The Westin Chicago River North, starting at 7am. Sign up here!