LOS ANGELES—When Robert Lowe founded Lowe Enterprises in 1972, he envisioned a diversified real estate organization that could succeed through the inevitable real estate cycles. Today, the vision of the company’s founder, chairman and CEO has come into focus with the evolution of the firm’s hotel, resort and resort community acquisition, development and management business group—Lowe Hospitality Group.
Since the company’s founding, Lowe Hospitality Group has assembled a portfolio of more than 40 hotel and resort properties under management by Destination Hotels & Resorts, the company’s hospitality management subsidiary, with 11,000-plus rooms, 20 golf courses and 18 spas. Lowe has completed $3 billion of hotel, resort and resort community development and redevelopment projects with another $600 million in the pipeline.
“Bob Lowe’s vision of a diversified organization has been realized, with additional Lowe divisions pursuing commercial acquisitions and development, and investing in hospitality, multifamily and commercial properties for institutional owners,” said Robert Lowe Jr., co-president of Lowe Enterprises and CEO of Lowe Hospitality Group.
Lowe Sr.’s first development project and first hospitality operation marked the beginning of Lowe Hospitality Group. The Gant, which has 143 units, in Aspen, CO, remains one of the area’s premier resort communities under the continued management of Destination Hotels & Resorts, according to the company.
“Bob’s involvement with the master planning and development of the condominium, lodge and retail core of Snowmass Village while employed by Janss Corporation left him with a great appreciation and affection for the area,” said Lowe. “When the opportunity arose to develop a luxury condominium property in Aspen, it was a perfect fit for his new firm.”
In recent years, Lowe Hospitality Group’s growth strategy has extended to managing, renovating and developing independent hotels and resorts. These assets “are customized both in the way they are physically positioned and in the way they are operated to be consistent with the local culture and environment,” said Lowe. Secondly, the company has invested in branded assets, in which it has found investment opportunities.
Over the last 12 months, Lowe Hospitality Group, through Destination, added eight properties under management to its operating portfolio. “That’s a record-setting achievement for us, but we hope to beat it in 2014,” said Lowe. “We entered new joint venture partnerships to develop and redevelop properties with great partners like Montana Property Group, AECOM Capital and Atlas Hotels, Inc. We added several strong, new partners to our third-party management business, including USAA, Host and Cornerstone.”
From a development point of view, Lowe Hospitality Group has observed an increasing number of mixed-use, urban projects that include a hotel component. The company is involved in MUDs such as the Santa Clara Centennial Gateway in San Francisco in a joint venture with former NFL quarterback Joe Montana’s Montana Property Group. The project will include a boutique hotel. Lowe Hospitality Group also continues to be active in large-scale resort development and redevelopment, having recently acquired a JV interest in the 40-acre Town & Country Resort and Conference Center in the San Diego area.
When observing markets, Lowe Hospitality Group has been focused on expansion in select urban, suburban and resort markets to grow the management portfolio geographically. The company added eight properties under management in the past 12 months in major metropolitan cities.
Generally, Lowe Hospitality Group foresees growth primarily in three markets: destination cities; resorts with either a strong national or international demand, or drive-to demand generated by cities with above- average growth; and strong suburban markets that have positive demographics, host growth industries and have begun to take on urban characteristics.
“In addition to those markets with solid demand, we also are careful to focus where strong supply constraints exist, particularly in our development activities,” said Lowe. “It is in these markets and with properties that have the capacity to attract multiple market segments and/or have diverse revenue sources beyond just rooms, where we have been most successful.”
However, Lowe Hospitality Group has two hotel acquisitions under contract, one on the East Coast and another on the West Coast. “We also have a number of management contracts well advanced in the pipeline and we expect to announce at least two new contracts this year,” said Lowe Jr. “On the development side, we have interesting hotel opportunities with land under control, both in Silicon Valley and Los Angeles, and will probably add a third project later this year. Finally, we are looking at a number of resort acquisitions and expect to announce a purchase within the year.”
The company’s source of financing has been secured through a variety of institutional and high-net-worth equity partners. Investments are either made through Lowe’s affiliated company, Lowe Enterprises Investors, which invests capital primarily on behalf of pension fund and insurance companies, or in direct joint ventures, largely with real estate private equity firms and high-net-worth entities.
Moving forward, Lowe Hospitality Group will continue to focus on adding to its portfolio of hotels and resorts. “Because our Destination Hotels & Resorts customer is traveling to the Caribbean and Mexico, we plan on expanding into those markets,” said Lowe Jr. “We believe this cycle is likely to be longer than normal and, as a result, see the opportunity to implement a small handful of development projects. With the recovery in the second home business being well behind other segments of the economy, we see an opportunity to acquire resorts that contain both hospitality operations and for sale real estate.”
He added, “We, fortunately, find ourselves with four strong avenues for growth—our traditional value-add investment business, the management contract business, development and our resort condominium management business—and would like to see a balance amongst them.”
Finally, the company anticipates an opportunity to more strongly market the Destination Hotels & Resorts brand to the transient marketplace. “I think you will see an exciting reintroduction of Destination Hotels & Resorts to the market next year,” concluded Lowe Jr.