Cummins: It’s not cap-rate driven, because oftentimes the buildings have little or no cash-flow or we’re shutting them down to do a renovation or redevelopment. So the way we underwrite, is that we look at what the asset can do after we execute our repositioning strategy.

So as opposed to a cap-rate generated analysis, we are doing forward-looking projections and ultimately base our pricing on IRRs, projected IRRs, based on our underwriting. So we’re not, honestly--most of the time--I don’t even know what a cap rate is on an asset or if I do, it’s normally very low because we’re not buying them for current cash flow. We think we can generate significant value over a three-to-five-year horizon where after we execute a repositioning strategy, etc. we’re generating a level of cash flow that justifies price to make the deal work. So a little of a different kind of model to most investors that are primarily focused on what the asset is and what it is producing today. Perhaps what it could produce with a little bit of tweaking. We’re generally looking at much more value-added propositions.

GlobeSt.com: So are you looking at lot of distressed?

Cummins: We’re looking at a lot of distress. In general, there is not a huge amount of distress out there that’s of particular interest. What the market is doing is bifurcating and what you’re seeing is distress at the low end of the spectrum for assets that probably are going to have a very difficult time recovering to a level that makes any sense. And you’re seeing prime assets that have a little bit of distress, but most of the distress is not priced into the assets, because of the assets that the market is pursuing more heavily, the market is accepting lower rates of return in the short term.

So the tsunami of distress that most people were predicting a couple of years ago really hasn’t come to fruition because we’re finding that most lenders are working with existing borrowers, letting them ride the cycle back up, as opposed to taking these assets and selling them out, ultimately, at the distressed level.

And when lenders are taking assets back--what we see most of the time--assets that are coming to market are often ones that are particularly tough to see the long-term value. And the assets that lenders are taking back and probably do have longer-term valuations, they’re generally holding onto them and asset-managing themselves, but they’ll ultimately take them to market, but they’re looking to sell them at levels that you certainly wouldn’t qualify as distressed.

GlobeSt.com: Amerimar wants to hold onto the properties for three-to-five years, is the medium-term holds, part of the strategy for getting a cash-flow and then selling it.

Cummins: We think our value-add is in our holistic approach of buying and running assets and adding value through the repositioning process. What we generally look to do, is devise the strategy prior to acquisition, acquire the property, execute the strategy as quickly as we can, and when we hit that event, meaning we’ve executed the strategy and we’ve predicted the results that are near them, that’s the time to exit. We’re really not constructed as an organization to manage huge amounts of assets as any one time, in terms of operating stabilized assets. It’s just not where our value-add is.

GlobeSt.com: There is more demand in London than the rest of United Kingdom. Is your repositioning of London hotels a response to the competitive London market?

Cummins: I think the UK is the tale of two markets. You’ve got London and you’ve got the rest of the UK. And they seem to be headed in increasingly separate directions as time goes by. So what you’re seeing is anemic growth in the UK, in general, and very dynamic growth in London in particular.

Most of our strategy is spent trying to find assets in London. That’s a difficult strategy given the amount of capital flowing into that market, but we’re still optimistic that we’ll find an opportunity here and an opportunity there. We don’t need to do 10 deals a year to be successful. We need to do a couple large good deals a year to be successful. The St. Ermins is a good example. It was a 65-million-pound acquisition, that’s a $100-million acquisition and with a renovation it will be a $150-million deal. That’s acquisition dollars. So we don’t need to do 10 of those, we need to do a couple of those at that size. Even smaller is okay.

It’s challenging in London because of the growth and because of the capital inflows. There are certainly other things floating around the UK other parts of the UK and I think there will actually be more as the Irish banking situation continues to sort itself out and NAMA looks to get on a more aggressive disposition strategy. You can see there are more and more assets in the UK. We might look at them, but we will certainly be cautious given the anemic levels of growth in the UK. We want to be really careful about what we look at in other parts of the UK.

London is a very interesting place, because it is a surprisingly enormous beneficiary of the economic move to the East in the economy because it has become a true crossroads between the east and the west, it’s easy to get to from most of the major economic centers of the world. It’s become this meeting place, this true destination, it’s a market where people from all over the world feel comfortable and I think it’s what’s driving this really remarkeable growth that’s going on there right now.

If you look at the past three months, were seeing RevPAR growth of 16%-20%. In a market where RevPAR was up 10% last year or more in some markets.

And unlike in markets, such as Manhattan, where RevPAR went down 30-some-odd percent in 2009, London was down roughly 2%, so where London is already well above the levels of performance that existed before the global financial crisis whereas I don’t think there are any cities in the states that have reached that level yet.

GlobeSt.com: As far as independent hotels go. Independent hotels are coming back, boutique hotels, what’s the difference of getting a limited brand associated and the advantages of disadvantages? How do you see the market shaping up?

Cummins: I think the overall trend of independent hotels for the better part of 20 years and it sort of microtrends up and down in the independent hotel markets. But I think overall the trend has continued to be acceptance of those hotels in most markets and we’re certainly seeing that now.

What we’re seeing as the brands continue to proliferate, is that there is an element of traveler that is different, that’s not generic and is not brand-oriented. And we have been careful of exploiting that element in different locations. I don’t see any reason why it’s not going to continue. If anything that trend picks up a little bit of steam. The fact that the likes of Marriot have created an Autograph collection and a Accor chas created an M-gallery, both of which are their answers to this continued trend toward unique hotels, I think that’s an acknowledgement from larger brands that these hotels are here to stay and they’re trying to get involved in that market segment.

That leads to your second question which is the advantages and disadvantages of having some sort of affiliation, whether that be a more loose affiliation or having a leading hotels or a preferred hotel affiliation or something that’s perhaps a little bit more structured like an Autograph Hotel or an M-gallery hotel. The St. Ermins is a part of M-gallery.

They are unique, differentiates in their markets, which certainly can stand on their own two feet, but benefit from affiliation with Accor tapping into the reservation system.

What we like about the M-gallery program…and our property in Nashville, the Hutton Hotel is a leading hotel, and we’ve done other hotels in other locations, but in London, Accor is the largest hotel company in Europe. They’re pretty underrepresented in London, in terms of the amount of rooms they have, compared to their overall system.

What we really like is that they gave us the opportunity to tie into the reservations system of Accor while totally maintaining our independence. Our branding stays independent, our operations stay independent, our designs stay independent, so for all intents and purposes it’s an independent hotel that has this very large pipeline sitting behind in terms of the Accor system.

So that represented for us in London the best of both worlds. Now there are other affiliations that work, the disadvantage of some of them if you’re in a market that’s having a tougher time bringing it’s own demand into the market, some of the smaller markets, I think it’s tougher to do a pure independent, but with the continued strength of th internet and the way people are buying hotels rooms now, it’s actually getting easier not harder to introduce an independent hotel into the market, if you know how to do it.