Q&A: President of AJ Capital's Graduate brand talks development, Midwest opportunity

(Tim Franzen at NATHIC Midwest)

AJ Capital Partners’ Graduate Hotels brand has hotels open in university towns in various states across the U.S. But when brand leaders look to the Midwest, they see unbridled opportunity for this unique brand.

AJ Capital, the Chicago-based real estate investment company led by Ben Weprin, founded the boutique brand, which targets college towns, in 2014. The existing portfolio comprises six hotels—Graduate Ann Arbor; Graduate Oxford; Graduate Charlottesville; Graduate Athens; Graduate Tempe; Graduate Madison—with more than 800 rooms. The brand has another four hotels—Graduate Berkeley; Graduate Richmond; Graduate Durham; Graduate Lincoln—coming online over the next nine months, which will bring the total room count to almost 1,400 rooms.

Tim Franzen, president of Graduate Hotels, discussed the brand’s development landscape with HOTEL MANAGEMENT as a preview to topics that will be covered at this year’s NATHIC Midwest, presented by Questex Hospitality Group, Nov. 16-17, at the InterContinental Chicago Magnificent Mile. There, Franzen will take part in a special afternoon "Interview with the President" session.

1. Looking at the Midwest, in what markets and segments is Graduate developing and investing? Why these markets and segments?

Franzen: In the Midwest, Graduate Hotels is currently open and operating in Ann Arbor, Mich., and Madison, Wis., and has plans to enter into a few other Midwestern markets anchored by Big Ten Conference universities over the next couple of years. Our next Midwestern opening will be in Lincoln, Neb., next year.

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Tim Franzen, president of Graduate Hotels

2. Beyond where you’re currently investing in the Midwest, where do you see more opportunity? Are there any Midwest markets that aren’t on hoteliers’ radars that should be and, if so, why?

Franzen: For Graduate Hotels there are still a few markets with Big Ten Conference schools that we’d really like to be in, and they are probably not hard to guess: Bloomington, Ind.; Columbus, Ohio; and Iowa City, Iowa, are all high on our list. 

Aside from Midwestern markets for Graduate Hotels, we at AJ Capital Partners see opportunity for investment in any market that has strong, stable demand drivers. If you have those demand drivers and you can find an underserved niche in that market, then you’ve got a winning combination.

3. When you look to acquire a property to convert to a Graduate hotel, what do you look for? What are the must-haves? What are the deal breakers?

Franzen: Our No. 1 criteria is always location. Each of the university-anchored markets we target has a center of gravity, whether it be a historic courthouse square or a vibrant commercial strip, it’s the place where you find the highest concentration of shopping, dining and nightlife. We must be in the midst of that center of gravity. If we can’t be on top of it or if it isn’t within a block or two walk, then it’s not the right location for a Graduate Hotel.

The Graduate Hotel in Oxford, Miss., is located on The Square, the cultural and historic hub of the city, and just about a mile from Ole Miss.
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4. Why do you like to develop in university towns?

Franzen: There are two things that we really like about investing in university-anchored markets. The first is the historic stability of demand, which we don’t foresee changing anytime soon. The second is Graduate Hotels’ ability to easily stand out as something truly differentiated from competitors that are typically nothing more than limited-service brands.

Join Tim Franzen and others as they discuss investment, development, financing and more at NATHIC Midwest, Nov. 16-17, 2016, at the InterContinental Chicago Magnificent Mile. To learn more and register, visit www.nathic.com.