In 2012, hotel investor Punit Shah has raced a market on the rise. With the economy improving, the window of opportunity for acquiring quality but financially distressed properties at bargain rates is beginning to close as asking prices increase.
Shah, president and chief operating officer of the Clearwater-based Liberty Group of Companies, a hotel development, investment and management firm, has aggressively snapped up properties over the past several months, bringing the group's cumulative investments to $265 million. Since 2010, Liberty has invested well more than $150 million.
This year, the company has been particularly ambitious. “I would comfortably say we've grown 40% since February,” says Shah. He added seven hotels, bringing the current portfolio to about 20 properties. Although hotels dominate the portfolio, it also includes two assisted-living facilities, located in Tampa and St. Petersburg.
Asking prices “absolutely” are rising, says Shah. “It's a double-edged sword because everything I've bought in the past two-three years has increased substantially in value.” The rising prices compel investors to up their game. “Looking forward, it does limit our opportunity to find those same type of deals as we have in the past. We just have to be a little bit more aggressive in sourcing those deals and trying to find the real deep areas of opportunity.”
The group's latest buys are well-located, newer hotels that fell into financial difficulty. In most cases, Liberty has been able to buy the properties for millions of dollars less than they sold for just a few years ago. “I would say that in virtually every case they have been in foreclosure or bankrupt or both,” says Shah.
His 2012 deals include the 73-room Holiday Inn Express Hotel & Suites in Jacksonville, which Liberty bought in a joint venture with DeBartolo Development. In August, Liberty purchased the Hampton Inn & Suites adjacent to the Hard Rock Hotel & Casino in Seffner, east of Tampa, for $4.25 million. The hotel had sold for $8.5 million in 2008, and was foreclosed on in 2011.
Other buyers were circling the Hampton Inn, says Shah. “It's just that we were able to perform quickly and we had the best ability to buy the property because we were all-cash buyers.”
This spring, Liberty bought the 80-room Candlewood suites in Fort Myers for $3.4 million. Built in 2008, the hotel was foreclosed on in 2010.
Shah is excited about a new effort, redeveloping the Mercantile Bank building in Tampa as a boutique hotel. Set in a prime location at 100 W. Kennedy Blvd., it will have 130 rooms. “We're finding an alternative use that we think has more value than keeping it as an office building,” he says.
Going forward, Shah says his group will continue to identify properties to buy on a distressed or opportunistic cost basis. “Our strategy is generally finding properties that have management issues or capital issues. We'll renovate these properties, we'll invest in capital improvements,” says Shah.
Liberty also puts a stronger management team in place. The short-term focus is on improving cash flow, while the long-term focus is on improving overall value.
Shah says Liberty Group remains in acquisition mode and projects continuing the company's current pace of growth. Although he admits the expansion is fast, Shah says he realizes a healthier market might reduce the number of good deals. “We're really trying to take advantage of a market situation as it exists,” says Shah. “That window of opportunity might not be much longer, so we're actively trying to find the best deals and the best investments we can.”