BOSTON—Ramped-up merger activity has impacted many aspects of the hospitality business within the past year, including the asset-management landscape, which was recently altered when two long-time firms joined forces.
In January, Capital Hotel Management, LLC (CHM), based here, and Warnick & Company brought their respective companies together to form CHMWarnick. The new firm’s combined client portfolio now totals 54 properties representing roughly $8 billion in assets undergoing asset management.
Chad Crandell, CHM president and cofounder—who will run the day-to-day operation of CHMWarnick—commented on the increased scope of the company and its ultimate goal. “We believe that we are now, if not largest in the U.S., potentially the largest [third-party asset manager] in the world. Size does matter, but the message we’re trying to convey to our clients—as well as current staff and future staff that join us—is that we want to be the first-choice asset-management company and business advisor,” he said.
Richard Warnick, principal of Warnick & Company, underscored the point and detailed why the deal made sense. “There are just so many synergies between the two firms. We really saw this as a great opportunity to consolidate two cultures that are very similar, and size matters in the business world,” he said, adding the companies really didn’t compete for many of the same properties or clients.
Ken Wilson, CEO and cofounder, CHM, noted that the veteran executives from each firm worked together as consultants earlier in their careers, and those longstanding relationships factored into the deal as well. “It’s been a long time coming. We’ve both been growing our organizations in parallel for 15 to 20 years. Now, we’re bringing them together so, in a sense, we’re both having explosive growth, but it’s really no growth. From that perspective, we think we can now together accelerate our growth,” he said.
CHMWarnick will provide hotel business advisory services designed to enhance hotel value and investment returns, including asset management, operational assessment and strategic development advisory from six different offices. While CHMWarnick will continue to be based here, the company will also operate satellite offices in Denver, Los Angeles, Minneapolis, New York and Phoenix. “Now, we have great national presence. We’ve got really good distribution across the country,” commented Wilson.
Crandell noted in January at the ALIS conference, when the merger was announced, that the company needed to go through the normal integration, but he expected it to primarily be “business as usual.” He added that one of the chief advantages of the consolidation is the company will have no less than 12 senior-level people with more than 30 yearsof experience.
“When you deal with senior people, like we both have in our companies, the resources you have to support that makes the difference. That’s what not only our people are going to benefit from collectively, but our clients as well. We’ve got really significant skills and resources [at Warnick & Company]that’s now going to be available to us,” said Crandell.
Warnick cited several advantages of the collaboration from his perspective: “We all get smarter when we’re around smart people challenging each other and helping to solve problems. Our database is bigger, including the number of hotels, types of hotels and brands associated with them. Everything expands pretty much exponentially,” he said.
Warnick & Company, which was founded in 1996 and brought 20 properties to the merger, maintains a strong emphasis on advisory services as well. Warnick described the mix as more of 50/50 split between the two. In contrast, CHM is roughly 80-90% focused on asset management. Wilson added when the company does take on advisory services, it’s generally for clients interested in acquiring a property and subsequently turning to CHM for asset management.
CHM, which was founded in 2000 and included 34 properties prior to the merger, asset manages on behalf of private equity firms, pension funds, Fortune 500 companies, government entities and sovereign government funds. The portfolio includes high-end brands such as Four Seasons, Hilton, Hyatt, Mandarin Oriental, Marriott, Ritz-Carlton, Trump Hotels, Westin and W Hotels, as well as some some high-profile independent properties.
Crandell further noted the company will asset manage some select-service properties as part of portfolio deals, but its focus is more on big boxes. As an example, he noted the firm oversees roughly a dozen convention center-size hotels. CHM also represents the owners of several under-construction projects, including the Westin Hotel at Denver International Airport, Marriott Marquis McCormick Plan Chicago and a $2-billion luxury, mixed-use project in San Francisco, for which the group is providing pre-development, pre-opening and/or asset management services.
Crandell acknowledged that it’s a good time to be in the asset-management business. He noted the industry is “finally in the wheelhouse of transactions.” He added the two firms were awarded asset-management contracts for 17 hotels over the past 12 months, and he expects continued growth going forward.
Wilson outlined some of the growth goals for CHMWarnick in terms of properties and personnel: “We have a goal of doubling the size of who we are in three to five years. We have 32 people right now, and we’re hoping there’s a day when we’re between 50 and 60 people. We have 54 hotels, and we think 100 is a pretty achievable and manageable number. We’d like to see the $8 billion in asset value become $15 to $20 billion,” he said.