By taking a long-term view of the hospitality industry, U.S. investment firm Gencom has managed to confidently buy hotels in times of both economic boom and bust.
In its latest deal, Gencom partnered with Corten — a Mid-Atlantic based private real estate investment fund manager — to acquire 50% ownership of the real estate of the eight hotels owned by Provenance Hotels in mid-December. Gencom’s hotel management affiliate, Pyramid Global Hospitality, acquired the operations of all 12 hotels in Provenance’s portfolio.
The deal, announced in April, expands Gencom’s footprint across the U.S. by growing its portfolio of owned independent, boutique hotels.
Over the past 30 years, Gencom has been involved in both the ownership and operation sides of hospitality, said Karim Alibhai, the company's founder and principal. Gencom's management operations and partnerships with institutions or high-net-worth family offices to buy real estate have given it an advantage over other firms in the market that are pure managers or owners.
“Being able to come with what we call one-shoe-size-fits-all gives us a real edge,” he said.
The Provenance Hotels Deal
Gencom’s leadership sat down with Gordon Sondland, founder and then-chairman of Provenance Hotels, in 2020 for a lunch meeting to talk out a potential deal, Alibhai said.
“It was literally over one lunch meeting that we drew on a napkin what the transaction should look like, and by the time we closed, it was literally within 95% of what we had drawn up,” he said.
The markets where Provenance has a heavy presence, namely Seattle and Portland, were hit hard by the pandemic, but there are a lot of opportunities there, Alibhai said. Gencom has a history of making deals involving repositioning and value-add work.
The management side of the deal made it more attractive, Alibhai said. As Provenance owned eight of the 12 hotels it operated, it presented both real estate and management opportunities for Gencom and Benchmark Global Hospitality, its hotel management affiliate.
While Provenance was a successful independent, boutique hotel company, the management deal with Benchmark and 50-50 real estate deal with Gencom opened up its access to more resources, he said.
Gencom has prided itself on its strategy of being a net buyer and investor through the highs and lows of capital cycles, Executive Vice President and Chief Investment Officer Alessandro Colantonio said.
“We’ve never had an issue finding unique opportunities loading up the pipeline,” he said.
The Provenance deal was drawn up at the height of the COVID-19 pandemic, when many in the industry had a more pessimistic view on the future of tourism and hospitality industry.
“There was a real opportunity there for us to step in, put in the right amount of capital to reposition, renovate these assets and structure something creatively with a longer-term view of the world,” Colantonio said.
Future of Provenance
Colantonio said first steps will include Pyramid taking on management of the Provenance properties and helping operations by adding scale, as well as investing capital to reposition and renovate the owned hotels.
“We will have capital allocated across the eight assets, so these will all get touched in some form or fashion,” he said.
As all the hotels are independent, Gencom essentially has a blank canvas to get creative with food and beverage and perhaps some branding options down the road, Colantonio said.
“It gives us a lot of flexibility right now in how we position these going forward,” he said.
Gencom has earmarked two additional hotels in its development pipeline to join the Provenance collection, Alibhai said. The company's plan is to further grow the portfolio.
Future Growth
Gencom's affiliation with Pyramid its and relationship with major brokers help the company to get an early look at market conditions, which allows it to be nimble in pursuing deals, Alibhai said.
The company has two main verticals — real estate ownership and management.
It has nearly $7 billion in luxury mixed-use properties under management, including such brands as Ritz-Carlton, St. Regis, Four Seasons, Rosewood, L’Auberge, Fairmont and Andaz. In most cases, those properties are managed by the brands.
Gencom has several properties in various stages of development, including the Nekajui, Ritz-Carlton Reserve set to open in 2024.
Gencom also has partnered with Hyatt Hotels Corp. on a Hyatt Regency as part of a Miami redevelopment project called the Miami Riverbridge, Alibhai said.
What helps Gencom’s strategy is that it follows where the opportunities are rather than staying within rigid criteria, Colantonio said. The company isn’t afraid to go to Costa Rica to make multiple investments and build a portfolio. It’s prepared to undertake a heavy redevelopment project in a market such as Bermuda.
“We tend to follow the story, and the market and other factors are secondary if it’s a good overall situation for us to go into,” he said.