By Keith Loria
Coming off its strongest year to date, Berkadia’s Hotels & Hospitality group went into 2019 with even loftier goals and reconstituted some of its leadership team to prepare for reaching those heights.
Among its moves was the addition of former Generation Companies executive John Testerman as a senior director on its investment sales team, as well as naming company veteran Matt Dower as director of operations, responsible for continuing to strengthen lender relationships and increasing the team’s ability to cultivate tailored lender solutions with optimized pricing and terms.
“We knew where we wanted to go and what we’re trying to build here and changing the way we feel mortgage banking investment sales have been done in the industry for a long time, so we took a proactive approach,” Dower said. “There have been a lot of opportunities coming in and one of the things we didn’t want to lose focus on was our foundation.”
Through the first three months of 2019, the company has continued to make big moves offering up two large portfolio listings. The listings include Glacier House’s portfolio of 15 hotels across the West and Southwest that is projected to bring in around $375 million; and a Hyatt House portfolio of two brand new extended-stay hotels in the Southeast that is forecast to fetch approximately $120 million.
“Looking at the industry as a whole, I think 2019 looks great,” Dower said. “We just had news that the Fed was not going to have any more rate bumps for what they see this year and a lot of people felt there might be three rate bumps coming down the pike and I think that’s great news for everyone.”
Assessing today’s hospitality market, Dower sees a lot of groups looking to transact, a strong economy and lenders still looking for hotel business to fill their allocations.
“There has been some talk that we are over the peak and RevPAR growth may have slowed down a tick, but I think things are still looking good in the year ahead,” he said. “Spreads have come in and people are still buying, selling and building hotels.”
On the mortgage banking side, in March, Berkadia closed on $170 million in financing for the Great Wolf Lodge, a nine-story water park resort in Garden Grove, CA, facilitating a 10-year fixed rate, full-term, interest only loan through Wells Fargo’s CMBS platform deal on behalf of McWhinney.
“This was an exciting opportunity and it lets us take another step as we broke down some new barriers and are doing some things people are not doing in our industry,” Dower said. “This has never been done on a Great Wolf Lodge before. We like to break down barriers and hurdles with lenders though relationships we built in the industry.”
The Berkadia team has also been engaged by Urban Commons to pitch nearly $125 million of floating rate debt to refinance existing debt and fund a portion of the conversion of The Wagner at the Battery in New York City to an internationally-recognized premium hotel brand.
“We are getting into some markets that are important to our clients; some that are hard to get a foothold in, like New York City. We have a lot of boutique shops that handle business there,” Dower said. “We’re looking at new markets and larger deals. We did construction lending for a new Hard Rock Hotel in New Orleans about 18 months ago.”
When Berkadia’s Hotels & Hospitality group began—the debt side came up first in 2015 and investment sales in 2016—Dower noted no one knew who the company was back then, but they don’t get those questions any more.
“When we were first building our platform, we were coming from other shops in the industry and Berkadia gave us this golden opportunity to really build what we wanted to do and we looked at what we could do differently,” he said. “We’re building trust and are excited about the next stage of growth.”
The way they accomplished that was going to clients and asking them, “What are you looking for? What have been the hurdles for you?”
“What we found was a lot didn’t like who they were working with or didn’t have trust,” Dower said. “Many were sold a bill of goods by a senior staff and then pushed off to a first-year analyst. We took that feedback and decided to create our group in a different way.”
With a leadership team that has a combined 100-plus years of experience, Berkadia’s Hotels & Hospitality group works on deals as a team and discuss them throughout the organization.
“Berkadia provides on the back end; we’re not a public company or driven by quarterly results, so we put it all on the client,” Dower said. “We’re built for the future and when the peak does fall, with the help of our parent companies—Berkshire Hathaway and Jefferies Financial Group—and our servicing portfolio of more than $240 billion, it allows us the privilege to take the long view with our clients.”
Looking ahead, Dower sees continued robust growth within the hospitality platform in 2019, and noted as long as investors can continue to borrow long-term money at a lower cost, they’ll continue to transact. And Berkadia is poised to help them along the way.