BEVERLY, MA-Captial Hotel Management (CHM) is acquiring Los Angeles-based Santa Monica Hotel Group for an undisclosed amount. Adding both a west coast capability and the California firm's hotel portfolio raises the competitive base for CHM. The group will add Santa Monica Hotel's founder and president, Pamela Greacen, as executive vice president, as well as Anthony Tarakdjian on the finance side.
"It gives us better distribution," CHM's president Chad Crandell tells GlobeSt.com. "We’ve been very east coast dominant with our offices and our representation and bringing Greacen's group on just gives us a lot more representation on a more national basis." The acquisition also adds a Chicago presence as well, he notes, which CHM has not had in a few years.
The two firms are complementary in asset class as the west coast firm's portfolio base is focused primarily on luxury hotels, while CHM aims at large, upscale full-service hotels. Crandell also notes that with the luxury focus, Santa Monica Hotel's investor base taps into high net worth individuals, which is not a traditionally strong investor class for CHM.
While CHM's current activity has been minimal, it is much to do with REITs capital advantage, Crandell notes. The prices for many of the urban core properties have not matched the yields CHM promises to their investors and does not match up with their underwriting. "The pricing of the REITs right now in terms of their cost-to-capital has made it very challenging for those of us that are not in the public market where capital is readily available for less cost than it is in the private sector," he says.
CHM is now seeking, on both coasts, opportunities where one of the strengths--management--can be key to profitability. They are looking outside urban core for the most part, but not entirely into secondary and tertiary markets.
"One of the advantages over our REIT competitors is that REITs need income-producing assets," Crandell explains. "So if we can find some locales that are in financial distress, which means they’re not generating positive cash-flow, that also is an opportunity for us where we can go in and address what’s contributing to that--whether it be a fiscal issue or a brand issue, whether it be lack of a brand, there could be issues there that need to be fixed over a reasonable period of time to generate cash-flow. Those are assets we could fit into our portfolio a little bit easier than REITs that are looking for something that’s accretive to their earnings."
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