NEW YORK—A pair of veteran industry executives have joined forces to create U.S. Lodging Investors, an investment firm focused on acquiring upper-upscale and luxury hotels throughout the country.
The new firm, which will joint venture with institutional investors and provide asset-management services for its JV properties, is headed by CEO Mark Rosinsky, most recently SVP/hotel investments for Seattle-based The Dow Hotel Co., LLC.
Gary Isenberg, current president of LW Hospitality Advisors (LWHA) Asset and Property Management Services, is serving as USLI’s president. He is keeping his position at LWHA.
In launching USLI, Rosinsky said the duo wanted to form a company that wouldn’t have any—or have minimal—conflicts of interest. “By having a company that can purchase both encumbered and unencumbered assets, we felt we could best do that,” said Rosinsky.
USLI’s platform, geared toward maximizing investment results while working in tandem with existing or USLI-chosen management companies, is a format not many companies follow, said Rosinsky. “We can do whatever makes sense for our capital partners. We can hold either short term or long term.”
Going after unencumbered properties opens the scope for the types of properties USLI and its partners can consider, noted Isenberg. “A lot of equity pairs itself with a management company. The conflict is that the management company would like long-term [contracts]because it wants to maximize its fees. So, the fact that we’re not managing properties allows us to align ourselves with the equity partners more true than a management company would be able to,” he said.
Rosinsky is confident the pair’s combined skill sets will serve the venture well. “We like to combine the latest and best practices with the wide amount of experience we bring to the table. I’ve been acquiring hotels for 22, 23 years. I was an appraiser. I know what to look for, how to structure deals, etc. Gary’s background is in operations, and he knows how to asset manage. So, it’s a good fit, a good match,” said the CEO.
“Our skill sets complement each other very well. Between the combinations, it’s kind of two plus two equals five,” added Isenberg.
Looking at what the top concerns are for owners regarding their asset managers, Isenberg said the key is being able to maximize the profitability of the operation. Additionally, “If there’s a repositioning involved, to analyze and look at that, or invest capital to improve the existing asset,” he said. “Cost containment is critical. I think revenue maximization is critical. There are some large assets that we’re currently looking at. Their group business and the balance of group to transient probably need to be looked at. It’s constantly asking questions and tweaking improvements—tightening the screws, so to speak,” he added.
Asset managers often are considered the bridge between the owner and the operator, and increasing cash flow usually falls within their purview. In robust times, however, with high occupancies and future business on the books, making sure it happens can get placed on the back burner.
The USLI executives suggested there are numerous ways to keep it top of mind.
“The hotel business is a nickel-and-dime business, meaning there’s a lot of revenue streams, a lot of expense factors. In any operation, there’s always somewhere where you could tighten up a little bit and increase cash flow—whether it be looking at your payroll and your labor standards or putting in proper inventory controls over operating supplies. I think you can constantly tweak and look for opportunities,” said Isenberg.
“In good times, sometimes owners —and definitely managers—take their eye off the ball a little bit because things are going well; bottom lines are up but you still have to watch every dime. In a downturn, everybody is watching every dime and management’s focused on it. But, in a good market, there’s still room to improve, especially because people may have a little bit more lax attitude when it comes to controlling expenses,” said Rosinsky.
“Increased revenue hides a lot of sins,” suggested Isenberg. “Our focus will be making sure the profit margins are being maximized. If there’s an increase in revenue, there should be an increase in cash flow, and we’ll make sure it’s maximized and expenses are controlled.”
As it’s name implies, U.S. Lodging Advisors intends to target opportunities throughout the country and, at this point, is not casting an eye toward the rest of North America, the Caribbean or overseas.
Rosinsky said the firm is currently looking at “some sizeable deals,” and is hoping to land two to three “very sizeable” deals by year’s end.
“We have capital lined up for those types of deals, both capital we’ve done business with before and new capital sources that we’ve had a relationship with but haven’t actually executed with,” said Rosinsky.
He indicated the timing is right as well. “We do see a need for a company that will do both encumbered and unencumbered properties. There’s not many out there—if any—that do both. Again, to best serve our partners, we think it’s an exciting time and also a good time to start a business in the hospitality line because there probably are a few years of runway left. So, we can obtain assets now that, hopefully, will be worth more in a few years, hopefully will have improving cash flow in a few years. Beyond that, it was just a good time in our lives to start a company. We both are long-term players in this business, and we still have a number of years before we look to wind down. It just makes sense at this time,” said Rosinsky.