Everwood Hospitality Partners is a hotel investor, operator and developer—in that order, according to managing principal Amit Govin. The company invests in full- and select-service hotels, and it currently has 14 hotels with 1,700 rooms in its portfolio, including what’s in the pipeline. The portfolio's chain scales range from midscale to upper upscale across investment types including debt, equity and hybrids.
Hotel Management recently connected with Govin and fellow managing principal Amit Patel for its “5 Questions With” series to discuss the company’s strategy, goals and just where the market is headed.
1. Your company has been acquiring properties recently. Tell me about that strategy. What types of properties do you look for, in what locations and why?
Govin: We underwrite markets and search for assets within those markets that fit our risk/return strategy. For our capital, this has historically relegated us to secondary and primary metro areas. If we can’t find something that works for us, we’ll consider developing ourselves or [joint venture] with a group with whom we have an existing relationship in the region. We have a strong development background; however, I’d consider us a cycle-driven developer.
Currently, we’re more focused on deep value-add and ground-ups in large metro areas excluding gateways. We like urban locations for intense access to amenities, mixed-use developments that recreate urban environments and lifestyle hotels in the higher chain-scale range that provide unique experiences that differentiate us among our competitors. Each of these represent the type of hotel “environments” that we’ve recently acquired in or are pursuing acquisitions in. However, for any investment we make, we go through the same scrutiny for a short-term asset hold as we would for a long-term hold. In the current development market, we’ve also had to temper some of our development expectations due to rising construction costs and labor shortages.
2. Is it a buyer’s or seller’s market right now in the U.S.? Or is it a market-by-market story?
Govin: I tend to think it’s a market-by-market story, with perhaps a lean toward a seller’s market. We’re not seeing super aggressive execution in most of the markets we’re observing, and we’ve noticed that many lenders are scrutinizing investments more than they have in previous cycles. For assets with strong cash flows, I tend to believe that there’s a lot of financing options out there but in the development or deep-value-add world only the B+ and above caliber developments are getting done.
Check out more from HM’s “5 Questions With” Series:
3. Over the next 12 to 24 months, what is one opportunity and one challenge for Everwood?
Patel: We have a strong development pipeline within some major national markets. Our challenge or goal will be to complete them efficiently and on time so that we can be in a good position for the next cycle.
Another double-edged challenge for us right now is finding acquisition opportunities that meet our risk/return requirements. Fortunately, we also benefit by being able to invest in debt and preferred equity if the risk/return dynamic doesn’t work for our equity.
4. Does Everwood like to be in the branded space? Is there any room for independents?
Patel: We probably lean toward the branded, soft-branded, lifestyle spectrum. It works for us from a capitalization standpoint and because, for the moment at least, it still works well in non-gateway cities. I still believe that there’s a strong value proposition from plugging into a brand with strong distribution and brand recognition. Our view is that the brand proposition is stronger in the select-service world and in non-gateway markets than in the higher chain-scale categories.
5. Where are we at in this cycle, and what should U.S.-based hoteliers be focusing on now to prepare for the next downturn?
Patel: We’ve had a strong run this hotel cycle, and for the most part, lending institutions have been more tempered this round in the hospitality space compared to other real estate asset classes. If I had a warning, I’d say to be wary of markets that are expected to have a big supply shock. I’d also suggest being prudent with capitalization and being prepared for an extended ramp-up period should a downturn be around the corner.