HEI Hospitality Prepares To Capitalize On Struggling Hotels

NORWALK, CT— In an effort to capitalize on the growing number of hotel bankruptcies since 9/11, four veteran hoteliers have teamed together to form HEI Hospitality, a newly launched hotel ownership and management company looking to snatch up struggling properties in hopes of turning a quick profit, similar to what they did in the early 1990s. Created by Gary Mendell, president/HEI Hospitality; Stephen Mendell, evp/acquisitions and development/HEI Hospitality; David McCaslin, vp of operations/HEI Hospitality; and Stephen Rushmore, principal/HEI Hospitality and president/HVS International— the company is a spin off of these hotel veterans earlier venture, HEI Hotels. “Steve, Gary, and I all worked together at HEI Hotels, which we later sold to Starwood,” said Mendell. “We’ve proven to have a good ability to assess the real estate assets we’re acquiring, look for assets to sell when the market turns, and make a good profit.” The company’s strategy is to acquire hotels it can “get at good prices now, and capitalize on the upswing that’s going to occur in the industry in the next three to five years,” said Mendell. That’s exactly what these veterans did in the early 1990s during the fallout of hotel real estate, when they launched HEI Hotels. As the economy improved and the hotel industry got back on its feet, the three principals sold the company in 1997 to Starwood Hotels and Resorts. “We’re hoping to repeat what we did then,” he added. Mendell could not comment as to whether the new venture would keep the hotel management contracts after the properties were sold, but all hotel operations will be run by HEI Hospitality’s wholly-owned management subsidiary Smilezzzz Hospitality. McCaslin, a principal in HEI Hospitality, is also the president of Smilezzzz. The group of hoteliers is not just hoping to profit from hotel bankruptcies, but also to work with public companies looking to liquidate assets due to an over allocation of hotels, as well as loans and joint venture opportunities. “If there’s an owner that’s in a position where he needs to raise cash to make short term obligations, we’d love to provide the cash,” said Mendell. He noted that HEI Hospitality is looking to spend approximately $200 to $300 million within the next 18 months to acquire upscale, four-star properties, averaging about 200 to 500 guestrooms. All financing is coming from “strong financial institutions and pension funds,” said Mendell.