How Hotels Can Transform Downtowns
Hotel developments and redevelopments can be foundations for turning depressed submarkets into hip, attractive destinations for travelers, local residents and other developers seeking building opportunities. Oxford Capital CEO John Rutledge has contributed to this trend in the nation's hottest markets and talked to us about projects that'll spur redevelopment.
John says Oxford loves being a catalyst for transitioning areas and tries to be in early on these developing neighborhoods, repurposing classic buildings for modern uses. He primarily focuses on the top 20 MSAs, with a heavy focus on urban submarkets, but will enter select tourist markets if a deal feels right. One key to being a transformative hotel: creating mixed-use that's been lacking nearby. John always implements a mixed-use component, whether it's retail offerings or added residential. John and his team are big believers in building "social hotels" with nice communal spaces, food and beverage components, and a heavy emphasis on rooftop bars. He also feels Oxford's downtown projects work mainly due to their flexibility.
Example: John says Oxford’s redevelopment 15 years ago of New York City’s Lexington Hotel (pictured), just off Park Avenue, was integral in creating the momentum necessary to transform Manhattan’s East Side into an upscale hotel destination. Early in the post-2008 market crash, Oxford was buying distressed properties all-equity, while other developers ran away. The debt markets then began to emerge and now there’s substantial liquidity again, domestically and globally.
John sees a similar situation at the Lexington in Boston, where Oxford is working on its 240-key Godfrey Hotel (shown). He believes the Godfrey can be a linchpin in redeveloping Boston’s Downtown Crossing. He says Boston is one of the country’s most coveted, and most supply-constrained, markets. RevPAR growth there is higher than inflation. John tells us the $60M project is a classic Oxford deal: multidimensional and multifaceted, taking advantage of tax credits and emptying out an office for repositioning.
Oxford’s fingerprints are all over Chicago’s downtown, with projects ranging from the Hotel Cass, Hotel Felix and the Godfrey Chicago in River North, the Hyatt Chicago Magnificent Mile and the Langham Hotel at 330 N Wabash. John is especially impressed by the growth of development along the Chicago River. Oxford was an early player there and sees that development now shifting south. (For example, the in-progress Londonhouse in the landmark London Guarantee building—pictured—and the Essex Inn in the South Loop.) John believes RevPAR growth in Chicago will be modest in coming years, as convention business, the explosion of the Millennial workforce and hotel supply will moderate it. But he cautions not to overbuild.
John says Oxford is always on the lookout for spot opportunities like its recent purchase of the Bay Harbor Hotel in Tampa (shown). He says plenty of investors are looking to deploy capital into Oxford's holdings, but the discipline in this cycle makes it harder to find smarter, appropriately priced assets.