I am used to hearing people politely suggest that they think I have lost my mind. This time around, the question of my sanity had to do with why an office-building developer, turned apartment-building developer, turned mixed-use developer, would now start buying hotels, especially during a pandemic that has decimated the hospitality sector.
I have a secret. I am always a bit fearful when swimming against the tide of public opinion, but so far, each time (and after exhaustive due diligence) the counter-intuitive approach has paid off. I now believe that if I’m not a little apprehensive, I’m probably not doing all I should to stay ahead of the unavoidable twists and turns of the real estate economy.
The Allen Morris Company approach to real estate is summarized in our simple Mission to Inspire, Impress and Improve the lives of all we touch. In our efforts to provide the best experience possible for those working in our office buildings or living in our multi-family apartments, we have in fact been serving others as a “hospitality company.” After years of working with our team to plan and design a series of new hotels, we formally launched our new hospitality division in January 2020: AMS Hospitality, an enterprise between The Allen Morris Company and Stormont Hospitality with the purpose of developing and investing in hotels.
Is that the worst timing in the world or what?
Actually, it has put us in the perfect position to use our hospitality mindset and our experienced hospitality team to seek out and acquire undervalued hotels in badly affected markets during the coronavirus pandemic. We are in the enviable position where we can provide capital, which the present owners may not have, to renovate and reposition quality hotel assets for a post-pandemic world when we believe people will be desperately hungry to travel again.
As I said, to swim against the tide is not a new strategy for us…
- In 1962, no one had ever seen a regional shopping center in Florida
- The AMCO Strategy: We developed Northside Shopping Center, followed by Dadeland Shopping Center. These projects were at the forefront of re-shaping the way Americans shop.
- In 1968, no one considered Brickell Avenue an office building market
- The AMCO Strategy: We developed the first multi-tenant office building at 1000 Brickell. Well, just look at Brickell now!
- In 1988 – 1995, office buildings were considered a terrible investment asset
- The AMCO Strategy: We bought vacant and distressed office buildings, which turned out to be a terrific success as described in my October blog.
- In 2000, Coral Gables was not considered an institutional quality office market that could attract Class-A corporate tenants
- The AMCO Strategy: We developed the Class A+ Alhambra Towers, which has won ten awards and serves as our company headquarters.
- In 2014, everybody knew the Miami condominium market was grossly overbuilt and uncertain
- The AMCO Strategy: We partnered with Related Group to develop and quickly sold out the SLS Lux Brickell Hotel and Condominium Tower in 2016.
- In 2015, the common wisdom was that office building developers don’t build multi-family apartments, and certainly not in a secondary market like St. Petersburg
- The AMCO Strategy: We delivered the Hermitage Apartments in St. Pete in 2017, winning the award as the Best New Apartment Building in Florida, and returning a 26% IRR to our investors.
- In 2020, hotels find themselves enduring challenging times
- The AMCO Strategy: We launched AMS Hospitality and are investing in opportunistic assets.
We just closed on the purchase of our first hotel. The Pelham Hotel is a boutique hotel in downtown New Orleans, strategically located between the French Quarter, the CBD and the convention center. It is a beautiful and historic gem, which we believe will sparkle after the renovations we will give it with our design and construction team. At AMS Hospitality, we are actively pursuing a dozen plus hotels that meet our requirements in the targeted markets we’ve selected, in order to acquire them over the next 12-18 months (at a target portfolio value of $300 million). And by the way, I knew we had the right investment partners for acquiring hotels when I discovered their name was Black Salmon. The name demonstrates our shared belief in contra-cyclical investment by “swimming upstream.” Click here to read the November 2020 press release on our partnership.
It was General George Patton in World War II who famously said, “If everyone is thinking alike, then somebody isn’t thinking.” Hopefully, we’ll stay humble and a little scared in order to keep thinking differently as we continue swimming upstream in the never boring world of real estate!