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Business Observer Friday, Jan. 27, 2017 1 year ago

Ch-ch-ch-ch-Changes

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Liberty Group is altering both the way, and the where, it does business — starting with land deals in its own backyard.
by: Kevin McQuaid Observer Staff

During its first three decades in business, Tampa-based Liberty Group focused on buying select-service hotels — with flags like Hampton Inn, Courtyard by Marriott and Holiday Inn & Express — in primarily suburban locations.

But over the past seven years, second-generation CEO Punit Shah has been methodically and strategically transforming the company into a more diversified enterprise.

The company's latest land acquisitions demonstrate how Liberty Group is evolving. Last year, the company spent more than $10 million to acquire tracts at 1155 E. Kennedy Blvd., 800 S. Harbour Island and at 319 Bayshore Blvd., all in downtown Tampa.

On Kennedy, near the city's burgeoning Channelside District, Liberty Group plans later this year to begin building a nine-story hotel that will combine a Hampton Inn and a Home 2 Suites extended stay hotel, both Hilton brands. The lodging project will be among the first in Florida to combine flags in a single property, a trend hoteliers are exploring to save operating costs and create greater operating synergies.

On the Harbour Island land, the last remaining development site on the tony residential enclave, Liberty Group intends to renovate a former SunTrust Bank building for its new headquarters.

And on Bayshore Boulevard, the company's nearly 1-acre parcel represents the only remaining development site for infill with the boulevard's coveted address. The firm is developing either apartments, a hotel, office space, senior living or a mix of uses there.

“All three deals we did in the Tampa area last year were strategic purchases of very special properties,” says Punit Shah, Liberty Group's CEO since 2010, when he took over from his father and company founder, Raxit Shah, now the firm's executive chairman.

“We're opportunistic. And to develop in my backyard, in Tampa, I consider that to have very little risk, which is important because I am pretty risk averse, and so is my family, and I am very protective of that.”

At the same time, Liberty Group has been moving away from its family business roots to a firm that, while still family led, welcomes outside investors and has the ability to leverage outside capital.

To that end, Liberty Group has opened an office in San Juan, Puerto Rico, where it hopes to establish a beachhead for what it believes will be inevitable future investment.

It has also recently launched Liberty Hospitality Fund II, a $150 million investment vehicle that hopes to take advantage of unique lodging deals over the next four or so years nationwide with outside investors.

The company's initial hospitality fund, created in 2013, invested $25 million to acquire eight hotels.

“My overall goal has been to transform this company from a family business to a family-owned firm, and so we're changing the way we do business in some respects and also where we do business,” says Shah, 36. “With additional capital, we'll be able to invest around the country in unique hotel assets.”

As such, although the company has invested in industrial properties and senior living communities, hotels will likely remain at the core of Liberty Group for years to come.

In all, Liberty Group owns 50 lodging properties containing more than 4,000 rooms in nine states. Its portfolio is valued in excess of $425 million, the company says.

What separates the company, Shah believes, is its ability to act quickly, its long-standing relationships and its reputation as a firm that close deals.

“We're often not the highest bidder on a property, but we're known as a company that can close, and we execute what we say. There's a certainty there, and I think that trumps a lot of other things,” Shah says.

Each of its three 2016 acquisitions in Tampa, for instance, were “off market” deals where Shah leveraged relationships with long-time property owners — the seller of the East Kennedy Boulevard site had held it since 1986 — and local market knowledge.

It didn't hurt, either, that Liberty Group paid cash.

In the case of 1155 E. Kennedy, the nearly 1-acre property adjacent to the site of Strategic Property Partners' $3 billion Channelside project had been slated for a 22-story apartment complex before Liberty acquired it last May.

But Shah contends that the site, with its proximity to cruise ships, restaurants, offices and entertainment options existing and pending, will be better suited for lodging.

He hopes the ground-floor Starbucks going into the $40 million project becomes a meeting space day and night.

Shah is uncertain what will happen with 800 S. Harbour Drive. In the near term, Liberty plans to renovate the 5,000-square-foot building and relocate its 14 local employees from 3,200 square feet in One Tampa City Center by summer.

“But it definitely has a highest and best use, and we plan to discuss that with neighbors going forward,” Shah says.

The 319 Bayshore Blvd. piece is similar. At 0.86-acre, it's the last vacant development site on Bayshore, and like Harbour Island, Shah says he's in no hurry to develop something there.

“You can't get a better location,” Shah says. “And I won't mind if I have to sit on it and wait for the next real estate growth cycle before doing something. We'd rather do the right thing than do the expedient thing.”

Tampa hotel analyst Lou Plasencia, who as CEO of the Plasencia Group has known the Shah family for 30 years, says patience and integrity are hallmarks of the organization.

“Punit has done a good job of expanding his influence both locally and nationally, through relationships and business dealings, and I've been very impressed with how he's gone about it,” says Plasencia.

“And he has a very good investment mind. He tends to look at things from a 40,000-foot level, and he doesn't get caught in the weeds. As such, he's often ahead of the curve,” he adds. “But most importantly, he's assembled a good team and he always puts his integrity and his family first.”

For his part, Shah maintains that he does not have a “predetermined” plan for Liberty's future. “I want for us to keep making smart investment decisions that have discipline and quality to them,” he says.
“At the same time, I want to instill in the organization a sense of culture and community and continue to grow at a responsible pace.”

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