INVESTMENT
Lowe ’ s recently acquired Woodlands portfolio has three hotels with 909 rooms and US $ 25 million in planned improvements .
going to be more spread out and companies are going to have more meetings to bring them back together . So , we ’ re not really worried about the ultimate recovery of the group business , but it ’ s a little bit more questionable on the commercial business travel side . So , we ’ re going to be a little bit more hesitant to invest in a downtown hotel that is largely dependent upon that customer .”
When it comes to new development , Lowe is not closing the door , but they say it definitely feels like a better risk-adjusted opportunity right now is with existing assets that can be underwritten because they have a history rather than trying to predict about something new .
As for portfolio deals , the Lowes would consider bigger acquisitions , but Rob says the challenge is identifying portfolios where the majority of the assets line up well with their investment criteria .
“ We ’ d rather be identifying opportunities where there ’ s an existing asset that we think we can reposition , and perhaps increase the mix to more leisure ,” Rob says . “ Or , we can make some adjustments to the property to make it more attractive to the leisure or vacation traveler , whereas historically , it hasn ’ t had that attraction .”
Yes , the Lowes are seeing those opportunities for acquisition but are quick to warn there are some buyers – from a brand building or other strategic reason – that may be overpaying because they just really want a property . “ And we ’ re also seeing private buyers with deep pockets with an estate planning or other noneconomic reason to want to own an asset , and we believe paying a price that is not otherwise justified ,” Rob adds . “ That leads to some owners who may be over optimistic on asset values . We are trying not to deal with those sellers .”
While conversions are definitely the flavor of the moment , Rob believes resort opportunities in great locations where there are relatively strong supply constraints do provide a case for special developments . “ I would also add as an offshoot to resort development , we believe that this next cycle of resort housing is going to be very strong , because hybrid work allows people to spend more time at resort ‘ second homes .’ The demand for that kind of product will be robust .”
The Lowes also fall in line with the current line of thinking about a lack of interesting opportunities in urban CBD locations . However , they do like urban locations in California such as Santa Monica , Hollywood or San Diego , as well as southeastern markets like Austin , Nashville or Miami that have very strong growth prospects due to their attraction to leisure guests and groups . “ Hopefully , in most of these areas you ’ re getting some reasonable discount on the asset to make up for the slower recovery ,” Rob says .
Case in point , Lowe in September acquired three hotels in The Woodlands outside of Houston , Texas . The Woodlands Resort ( converting to Hilton ’ s Curio Collection ); The Westin at The Woodlands ; and Embassy Suites by Hilton , The Woodlands at Hughes Landing were purchased with an institutional investor Pimco for US $ 252 million and will continue to be managed by Lowe ’ s hospitality management subsidiary , CoralTree Hospitality . Lowe immediately began a US $ 25 million capital investment program at the three hotels , totaling 909 rooms .
“ The resort property was down the middle of the strike zone for us , where it requires some significant value-add , whereas the other two are not in a downtown market and in an area where there are many reasons for leisure and groups to be without the challenges of the dense urban location ,” Rob explains . “ Internally , we like to call them urban resorts .”
The Lowes say they have a number of specialty private equity investors that they
18 hotelsmag . com January / February 2022