WCHRI Conference: “If I had 100 million dollars…”

Carrie Russell and Mark Sparrow of HVS.

Carrie Russell and Mark Sparrow of HVS.

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VANCOUVER—It was a gathering of the who’s who of the Canadian hotel industry, western edition, with delegates so keen on networking that it was hard to herd them into the meeting rooms.

Once there, they got the lowdown on what’s happening in the western half of the country, starting with a state-of-the-industry report from Carrie Russell and Mark Sparrow of HVS.

In 2012, there were 79 hotel deals in Canada worth $862 million, Russell noted. This year saw a similar number of deals—78—but they were worth $1.7 billion, or almost twice as much. There were more deals in all provinces except New Brunswick, Quebec and Saskatchewan, where there were no deals at all.

Institutions and equity funds accounted for almost half of investors at 48 per cent, followed by hotel investment companies at 23 per cent, private investors at 12 per cent, public companies/REITs at 11 per cent and offshore investors at three per cent.

Sale of the Westin portfolio in Vancouver, Calgary, Edmonton, London and Ottawa in September had a huge effect on the numbers. The seller was PSP investments and the buyer Starwood Capital Group. They bought 2,925 rooms for $765 million, which breaks down to $262,000 per room. The cap rate was 7.7 per cent. The breakdown for hotels was as follows:

  • Westin Edmonton, $86.2 million, $207,200/room, cap rate 7.7 per cent TTM (trailing 12 months);
  • Westin Ottawa, $139.0 million, $280,200/room, cap rate: 8.3 per cent TTM;
  • Westin Bayshore (Vancouver), $150.8 million, $295,100/room, cap rate 5.0 TTM;
  • Westin Harbour Castle (Toronto), $196.9 million, $201,500/room, cap rate 8.1 per cent TTM;
  • Westin Calgary, $192.1 million, $365,900/room, cap rate 8.8 per cent TTM.

David Larone, panel moderator, with Tom Gaglardi,  John O’Neill, Marc Staniloff and Arni Thorsteinson.

David Larone, panel moderator, with Tom Gaglardi, John O’Neill, Marc Staniloff and Arni Thorsteinson.

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Investing $100 million
After a day of presentations on the hotel investment, David Larone of PKF moderated a panel consisting of active investors, and asked the how they would spend $100 million.

Arni Thorsteinson of Temple Hotels Inc. said that Temple is a publicly traded company on the TSX worth $310 million. Last year, they distributed $16 million to shareholders, and it’s no secret that his company is on the hotel acquisition trail.

If he had $100 million, he would be attracted to the Alberta market—Calgary, Edmonton and Fort McMurray. “We have been very successful in secondary and tertiary markets,” he said.

Marc Staniloff of Superior Hotels & Resorts has developed the Super 8 and Wingate brands in Canada and is now growing the Microtel brand and branching into Marriott.

He’d spend his $100 million in much the same way as Thorsteinson—in Fort McMurray and Lloydminster in the West and Northern Ontario and Saskatchewan further east.

Although O’Neill Hotels is based in Canada, CEO John O’Neill says most of their hotels are in the U.S. They own 33 hotels, have four under construction and plan to purchase four more. They operate four hotels in BC.

O’Neill said his company just spent $65 million on four properties in Pittsburgh. He’s attracted to Virginia secondary markets, Minnesota and New Mexico. They have the 32-property Oak Tree Inn chain which services the U.S. rail industry. They have a long term deal to house freight train staff. And, he said, “the railways pay every day.” He added that 95 markets in the U.S. would be in the top four if they were located in Canada.

Tom Gaglardi heads up Northland Properties, a 50-year-old family-owned business. In addition to their Sutton Places, Sandman Hotels and Revelstoke Resort, Northland’s portfolio includes Moxie’s, CHOP and Denny’s restaurants, and the Dallas Stars and Kamloops Blazers hockey teams.
How would he spend $100 million? “That’s basically what we do,” he said.