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Mark Owens on Colliers International and the New Economics of Hotel Deals · Brand Insiders

• 0:08
  SPEAKER_02: Welcome to another episode of Hospitality Nets Brand Insiders.
• 0:12
  SPEAKER_02: I am joined today by Mark Owens, Hospitality Practice Group Leader and Vice Chairman at Colliers International.
• 0:20
  SPEAKER_00: Mark, how are you?
• 0:22
  SPEAKER_00: I'm doing well, Adam.
• 0:23
  SPEAKER_00: Thank you so much for the opportunity to be here with you today.
• 0:27
  SPEAKER_02: Well, it's fantastic to get your perspective because this is a series on innovative hotel brands, and yet Colliers International is not a hotel brand.
• 0:40
  SPEAKER_02: It is a company that works with hotels.
• 0:43
  SPEAKER_02: So to start, could you describe how Colliers works with hotels?
• 0:48
  SPEAKER_00: Certainly.
• 0:50
  SPEAKER_00: To give you a background, you know, we span the gamut.
• 0:54
  SPEAKER_00: As you know, we are an international uh commercial real estate services firm, third largest in the world, um, and public.
• 1:02
  SPEAKER_00: So we're listed in Toronto as well as the NASDAQ.
• 1:05
  SPEAKER_00: And I was uh fortunate to be included in the hospitality practice to help grow our practice in the United States and coordinate and work with our global team members as well.
• 1:15
  SPEAKER_00: And we really touch on a number of different areas within the lodging segment.
• 1:20
  SPEAKER_00: Um, in everything from capital markets, which is really investment sales, uh, it is debt transaction advisory and structured finance, so helping people refinance or acquire hotels.
• 1:32
  SPEAKER_00: Uh, we also play a fairly large role in the joint venture equity space, so helping people either recapitalize companies without necessarily selling or assets.
• 1:43
  SPEAKER_00: And then all of those are under my purview.
• 1:46
  SPEAKER_00: We also have a fairly large consulting and valuations practice for lodging.
• 1:52
  SPEAKER_00: So that can be everything from appraisals for lenders, um, valuations for equity positions, etc.
• 2:01
  SPEAKER_00: And that's all domestically in the United States.
• 2:04
  SPEAKER_00: Broadly and cross-border, we also offer uh asset management services in addition to architectural and design services in certain markets.
• 2:15
  SPEAKER_00: So, really focusing on uh the complete life cycle of assets within the lodging space.
• 2:22
  SPEAKER_02: I like that term life cycle because it's so important to think holistically about everything else that affects the sale, refi, or the joint venture JV that goes into a project.
• 2:37
  SPEAKER_02: It's no longer just about presenting a deal, it's about how the mechanics of that hotel work, how the operations work, how the drawings work in terms of the architecture, the master plan.
• 2:51
  SPEAKER_02: Everything affects everything else in hospitality, and it is a very complicated field.
• 2:56
  SPEAKER_02: So therein, um, I'm wondering uh if you could just take a step back and talk about your background.
• 3:03
  SPEAKER_02: Uh, you've worked at uh various other companies that are related to what you're doing now in Colliers.
• 3:10
  SPEAKER_02: Just give us some give us some background and how you ended up at Colliers in your current role.
• 3:14
  SPEAKER_02: Just give us the Kohl's notes.
• 3:17
  SPEAKER_00: Thank you, Adam.
• 3:18
  SPEAKER_00: I wanted to be a developer when I was younger and realized very quickly that development takes a long time.
• 3:24
  SPEAKER_00: Uh, and I'm technically a deal junkie, I think, when you look at it, despite being relatively mild-mannered.
• 3:29
  SPEAKER_00: I had the ability to uh work with some of the leaders in the business, starting at Tishman, uh, worked with Sonoblik Goldman and a gentleman named Mark Gordon, who really ran our hospitality practice, uh, and had the distinct ability to build our debt and structured finance practice at CB, and then joined Colliers to really help us, as I mentioned earlier, expand the practice uh in all capital markets across the United States and working with my team globally.
• 3:56
  SPEAKER_02: So you mentioned that development has a long life cycle, it takes a long time.
• 4:02
  SPEAKER_02: Maybe could you give us a specific example without mentioning any names, of just drawing on a recent deal or a recent project that you've helped advise just to show the ins and outs of hotel development?
• 4:19
  SPEAKER_00: Certainly.
• 4:20
  SPEAKER_00: We had the ability to work with a large uh brand uh on a massive development of a hotel and convention center during the pandemic.
• 4:32
  SPEAKER_00: And it was exciting because there were multiple components.
• 4:36
  SPEAKER_00: We were in the middle of a pandemic, you had a convention center component, you had nearly a thousand rooms, and we also had development incentives that were expiring.
• 4:46
  SPEAKER_00: So being able to work with the developer and family and brand and pull that all together, find a capital solution on the debt side in order to hit the timelines for groundbreaking and deliver ultimately an incredibly beautiful new convention center hotel in one of the largest sort of destination markets in the world was super exciting.
• 5:08
  SPEAKER_00: Uh, and it was a very large check for a period when the world had basically stood still.
• 5:15
  SPEAKER_02: And uh I guess you're talking about finding financing during the pandemic and then uh making it shovel ready and then shovels in the ground um and then opening three to five years after those initial conversations.
• 5:33
  SPEAKER_00: Exactly.
• 5:34
  SPEAKER_02: Yeah.
• 5:35
  SPEAKER_01: And if we think about go on.
• 5:37
  SPEAKER_02: No, uh I was gonna say, if if you think about it, that's that's a ton of work, right?
• 5:42
  SPEAKER_02: Uh three to five years, it's easy to say, you know, oh, it's three to five years.
• 5:46
  SPEAKER_02: But in that, there's there's calls, there's meetings, there's reviewing term sheets, there's legal papers, there's uh there's due diligence on every end.
• 5:57
  SPEAKER_02: It's a process.
• 5:59
  SPEAKER_00: It is a process.
• 6:01
  SPEAKER_00: Um you know, to to look at the contrary, uh, we just closed on the refinancing of a resort in Bermuda, which is exciting because it's a cash out.
• 6:11
  SPEAKER_00: So we were able to repatriate substantial equity to our client.
• 6:15
  SPEAKER_00: Uh, what's really interesting about this deal is it was the first CMBS transaction done in that market.
• 6:21
  SPEAKER_00: And that's important for a number of reasons.
• 6:24
  SPEAKER_00: Number one, the all-in rate was substantially lower than our other financing options.
• 6:30
  SPEAKER_00: So it works, you know, works well for our client and their uh their equity metrics.
• 6:35
  SPEAKER_00: Uh, and number two, when you have a fixed-rate CMBS offering done in a new jurisdiction, it opens the market for more capital, which means it's easier to transact going forward, and it really helps not just our client, but others in the market uh with additional liquidity that may not have been there previously.
• 6:54
  SPEAKER_00: And I'm fortunate in the in that that is the fourth, I think, time that we have brought the CMBS market um through education of all of the different stakeholders to a new jurisdiction outside of the United States.
• 7:09
  SPEAKER_02: Wow.
• 7:09
  SPEAKER_02: You know, that that's a very astute point you talk about in terms of opening up markets.
• 7:16
  SPEAKER_02: Um, first off, CMBS commercial uh mortgage backed securities.
• 7:22
  SPEAKER_02: Mortgage-backed securities, yes.
• 7:24
  SPEAKER_02: And you're opening up Bermuda for this.
• 7:27
  SPEAKER_02: And my question therein is um, how does that relate to how you would assess the value of a hotel or a development?
• 7:39
  SPEAKER_00: It's a very good question.
• 7:41
  SPEAKER_00: Um and it's a complicated one.
• 7:44
  SPEAKER_02: So I'll try and yeah, there's there's different ways to calculate when you're doing an appraisal.
• 7:49
  SPEAKER_00: Exactly.
• 7:50
  SPEAKER_00: So our typical process is is based on understanding and and looking at not just the market itself and what's going on in the actual location, looking at the competitive set and understanding how our hotel or future hotel stacks up with that competitive set.
• 8:09
  SPEAKER_00: Uh, sometimes that competitive set is local in nature, other times it may be international in nature, depending on whether there is like kind product in a market.
• 8:19
  SPEAKER_00: Meaning, yeah, if I'm the only super luxury hotel in Bermuda, I may need to look at other island destinations to draw comps versus four other hotels in that market.
• 8:30
  SPEAKER_00: And then with those components done, we run a discounted cash flow analysis.
• 8:36
  SPEAKER_00: So we basically project out our pro forma projections, understanding what our revenues look like, what our expenses look like, uh, and then discount that to today's dollars to derive our value today.
• 8:49
  SPEAKER_00: And that's the premise for our loan to value, which is one of the governors that we use when going to market for financing.
• 8:57
  SPEAKER_00: Um, so for example, to use an extreme case, if it costs$100 million to build a hotel and our value is$80 million, that is a problem.
• 9:08
  SPEAKER_00: If it costs$100 million to build a hotel and our value is$160 million, we have a lot more room to play within the financing markets and to push the proceeds level of that transaction with our lenders.
• 9:24
  SPEAKER_02: And by proceeds level, you are referring to LTV, loan to value in terms of that.
• 9:29
  SPEAKER_02: Loan to value and the dollars that our client will get from that lender.
• 9:34
  SPEAKER_02: Yep.
• 9:35
  SPEAKER_02: Um, okay, so what we're now touching on is some of these best practices, these golden tricks of the trade that you're using to work on behalf of hotels and developers to get the best deal possible.
• 9:50
  SPEAKER_02: So I'm wondering just if you could list one or two, whether it's a refi, JV, an exit, a cash out, uh, how do you help expedite the funding or the transaction process on behalf of owners and developers?
• 10:06
  SPEAKER_00: Great question, Adam.
• 10:08
  SPEAKER_00: There's a couple of components.
• 10:10
  SPEAKER_00: Number one is organization of diligence, which is understanding what a lender wants and needs and what you have or don't have.
• 10:20
  SPEAKER_00: And so in advance of going to market, we create a succinct overview of the project and we understand and organize all of the different pieces that a lender would be uh would need to close.
• 10:37
  SPEAKER_00: That's important because timing is everything.
• 10:39
  SPEAKER_00: We want to be able to respond to a lender quickly.
• 10:42
  SPEAKER_00: And if a client is disorganized, that delays the process.
• 10:46
  SPEAKER_00: We lose credibility collectively, our borrower loses credibility in the market.
• 10:51
  SPEAKER_00: So it's ensuring every step of the way that the analysis is credible, that our borrower is credible, and that components like the brand and franchise agreements are in compliance.
• 11:03
  SPEAKER_00: So really trying to remove as many pieces of the puzzle that can impact or delay a transaction so that it is as smooth as humanly possible.
• 11:15
  SPEAKER_02: Yeah, and and you know, the phrase I was thinking of is striking while the iron is hot is um having all your ducks in a row, to use another phrase, ensures that you're able to capitalize on every opportunity that comes your way and to meet uh whichever lender or even an equity partner is looking at that particular time for that asset class.
• 11:39
  SPEAKER_00: Exactly.
• 11:40
  SPEAKER_02: Yeah.
• 11:41
  SPEAKER_00: Our objective as well is to make sure that we do as much of the lender's work as possible so that when they see something from us, it gets a lot more attention because it's easier for them to digest.
• 11:51
  SPEAKER_02: Yeah.
• 11:52
  SPEAKER_02: And that's the the human element to all this is uh it's not like people are just reviewing and and approving things on the spot.
• 11:59
  SPEAKER_02: They have conversations.
• 12:00
  SPEAKER_02: It's all everything is a group decision on either side, and uh, you know, those conversations take time and you can miss your window if you uh if you're you know you have a land on option or somebody has a different strategy or something like that.
• 12:14
  SPEAKER_02: Exactly.
• 12:14
  SPEAKER_02: Yeah.
• 12:15
  SPEAKER_02: So to move into general trends in terms of what you're seeing, because you work with so many different owners, brands, developers, you have a very astute and um you know, you know, prescient view on the industry.
• 12:34
  SPEAKER_02: So what are you seeing in hospitality real estate that excites you, that that is is creating deals and making things happen right now, heading into 2026?
• 12:47
  SPEAKER_00: It's great.
• 12:47
  SPEAKER_00: Well, great question.
• 12:49
  SPEAKER_00: I think that the most exciting thing is the continued evolution of experiential travel.
• 12:55
  SPEAKER_00: Uh and that is tied to demographics, which I think we'll probably talk about a little bit later.
• 13:00
  SPEAKER_00: Yeah.
• 13:00
  SPEAKER_00: Uh but there is so much that can be done in the space.
• 13:03
  SPEAKER_00: You know, when we think about traditional hotel brands, it was generally the big names that we all know.
• 13:09
  SPEAKER_00: And it implied a sense of security and understanding of what you were going to get, which is great.
• 13:15
  SPEAKER_00: Now, taking that standardization and technology, but applying it to authentic experiences is phenomenal, right?
• 13:24
  SPEAKER_00: So, how do you capture that traveler that wants to experience um an unknown location uh but still have the comfort and security of knowing that the safety is there, their uh services are going to be there, et cetera.
• 13:42
  SPEAKER_00: I think that is uh truly interesting.
• 13:45
  SPEAKER_00: The other component that I find fascinating, particularly when we look overseas versus domestically, is the living component.
• 13:53
  SPEAKER_00: And that's the integration of living with lodging.
• 13:57
  SPEAKER_00: So instead of looking at a hotel as necessarily as just a hotel, it's understanding that uh you may have residences, you may have multiple types of residences in a building, and really bringing that technology, particularly um prevalent in Asia to the United States and other uh other markets.
• 14:16
  SPEAKER_00: I think that's a very exciting area to be in.
• 14:19
  SPEAKER_00: And we'll probably talk a little bit about some of the impacts of that later as well.
• 14:24
  SPEAKER_02: Definitely.
• 14:24
  SPEAKER_02: Well, uh, you know, we might as well uh touch on three points right now.
• 14:29
  SPEAKER_02: Uh you you mentioned uh unknown destinations and having that safety.
• 14:34
  SPEAKER_02: Um where are you seeing, geographically speaking, where is the growth happening right now?
• 14:41
  SPEAKER_00: That's a great question.
• 14:42
  SPEAKER_00: And it's it's a very difficult one to answer because it's multifaceted.
• 14:48
  SPEAKER_00: Exactly.
• 14:48
  SPEAKER_00: I think what COVID has taught us in the United States as an example is there are a number of markets that may have been thought of as second, third tier, or maybe not even within the top five category that have unmatched beauty and aren't well known.
• 15:06
  SPEAKER_00: And those have now become, I'd say, more institutionalized for that experiential traveler.
• 15:11
  SPEAKER_00: And it's the same thing when you look at, let's say, the Amans of the world, who have really been phenomenal at discovering these incredibly unique areas and bringing it, you know, to the most affluent traveler where there is nothing else and no one else around.
• 15:29
  SPEAKER_00: Um, so I think those are two of the components that we have to balance.
• 15:33
  SPEAKER_00: Uh, and obviously economics plays into that because developing something where nothing exists is far more costly than developing something in an area that may have infrastructure, just not the right lodging product yet.
• 15:47
  SPEAKER_02: Yeah, it's it's um it's a very difficult game because a lot of times, particularly when you're talking about Amons uh and other ones in the ultra-luxury class, they excel at being in remote destinations, and that's part of the draw that allows them to get the ADR.
• 16:04
  SPEAKER_02: But um, if the lot isn't serviced, uh good luck.
• 16:08
  SPEAKER_02: Exactly.
• 16:09
  SPEAKER_02: Yeah.
• 16:10
  SPEAKER_02: So now to pick out another point, we covered geographics.
• 16:14
  SPEAKER_02: Let's talk demographics.
• 16:15
  SPEAKER_02: And again, it's probably multifaceted, but where is the growth in in demographics and uh the brands and how they're meeting uh those demographic shifts?
• 16:26
  SPEAKER_00: The luxury segment continues to to perform, and that's really kind of witnessed um by even you know year-to-date October figures, where it's the the largest growth in RevPAR, uh, which is revenue per available room, a benchmark we use in lodging to assess sort of our overall health versus other asset classes.
• 16:48
  SPEAKER_00: So I think we will continue to see that growth in the luxury segment um and that experiential traveler.
• 16:55
  SPEAKER_00: On the contrary, what we have seen, unfortunately, is a um a shift in the more price conscious and budget traveler, uh, which unfortunately is seeing RevPAR declines.
• 17:08
  SPEAKER_00: And so, to your point, when you look at the overall broader global um landscape, you know, we have more billionaires today than we've had in the past.
• 17:20
  SPEAKER_00: There continues to be a transfer of wealth, be it from our parents or our parents' parents to the next generation.
• 17:26
  SPEAKER_00: So that wealth, instead of being spent, is now going to that side of the family.
• 17:31
  SPEAKER_00: And you also have the large subset of the population that has money that's retiring and able to take advantage of that uh time to travel and again build on the experiences.
• 17:44
  SPEAKER_00: And it's evidenced not just in the hotel space, but you look at the airlines where you know fleets are being re-categorized to have much larger first and business class cabins versus economy cabins.
• 17:57
  SPEAKER_00: So it's happening everywhere in the travel and and lodging industry space.
• 18:04
  SPEAKER_02: Yeah, and that's part of the reason why it's so hard to wrap your head around because it's it's everything all at once in terms of these demographic trends.
• 18:12
  SPEAKER_02: Uh, to pick out one that you said about this wealth transfer.
• 18:16
  SPEAKER_02: Um, there's a lot of discussion about the boomers being the wealthiest generation passing their wealth on.
• 18:24
  SPEAKER_02: But another thing that we're seeing is something called multifamily travel, where the boomers are saying, in large large part, they're saying rather than just go on my own and then pass the wealth down, and then uh there's a state tax or it's in a trust, et cetera.
• 18:42
  SPEAKER_02: I want to spend my inherit uh my kids' inheritance with them.
• 18:46
  SPEAKER_02: And we're gonna go on that uh you know, three-generation half a million dollar safari trip.
• 18:54
  SPEAKER_02: And we're gonna, I'm gonna pay for everyone to be in first class, so therefore supporting your airline trend that we're seeing.
• 19:01
  SPEAKER_02: Uh, and then we're gonna uh rent out a lodge together in uh a safari lodge somewhere in Africa, and that you know, replace Africa with uh Southeast Asia, with South America, uh, with Europe, with domestic.
• 19:15
  SPEAKER_02: And this whole idea of multi-family, uh multifamily travel or multi-generational travel really becomes a huge trend.
• 19:23
  SPEAKER_02: Are you are you seeing anything of that nature, either statistically that can point to that, or any brands that are offering interesting amenities that appeal to that type of travel?
• 19:35
  SPEAKER_00: It's a great question.
• 19:37
  SPEAKER_00: That multi-generational traveler, I think, is so important because for a number of reasons, it trains the younger generation to travel.
• 19:45
  SPEAKER_00: It gives them that experience, of course.
• 19:48
  SPEAKER_00: It's keeping that dollars, those dollars in our system.
• 19:52
  SPEAKER_00: Uh, and when you look at a number of of just the call it experiential side of the equation, uh, the projects that are trying to figure out how to prolong your length of stay, how to attract individuals andor families, uh, all coming together as part of that experience is uh, I'd say is what's leading the forefront of development in some cases.
• 20:14
  SPEAKER_00: Yeah.
• 20:14
  SPEAKER_00: Uh you know, using that giant uh convention center hotel as an example, it's built right next to an entertainment complex with sporting and various other activities to capture, it may not be multi-generations from a grandparents to children, but it might be the parents and children staying longer to go to a game or to experience the entertainment um district, right?
• 20:39
  SPEAKER_00: Which is hugely helpful for us.
• 20:41
  SPEAKER_00: And then on the other side of the equation, when we look at development and it ties a bit into technology, you know, one of the things that developers have gotten smart about, particularly in destinations and resort areas, and it's through the uh the adaptation of our lodging industry, be it Airbnb, uh VRBO, etc., is looking at data from those systems, be it through Air DNA or other data sources, and thinking through what the actual development should look like from a hotelier's perspective.
• 21:20
  SPEAKER_00: Are people renting two and three bedroom homes because they can't stay at our resort because we only have traditional hotel rooms?
• 21:28
  SPEAKER_00: So you're seeing unit mixes evolve based on the technology and the data that we have today, which was not so transparent, you know, 10, 15, 20 years ago.
• 21:42
  SPEAKER_02: And that that's that's huge.
• 21:43
  SPEAKER_02: You talk about unit composition, and I've observed new projects in Europe that are luxury and they're all suites.
• 21:52
  SPEAKER_02: So you think you need to have data to support that, or else you're building half the room count, which potentially means half the revenue.
• 21:59
  SPEAKER_02: Right.
• 22:01
  SPEAKER_02: And that segues into this whole idea of the merger of living and lodging that you talked about, be it extended stay or branded residences, because those are asset classes that feed directly into this new modality and new behavior of travel, where people want to have more space, they want suites, they want multi-bedroom spaces either for themselves or uh or for family travel.
• 22:31
  SPEAKER_02: Can you talk about the value proposition for investors in these two new types of rapidly growing asset classes, extended stay and uh branded uh apartments or branded residences?
• 22:44
  SPEAKER_00: Yeah, great question.
• 22:45
  SPEAKER_00: Extended stay is a fascinating subset of the market because it really kind of covers two components.
• 22:53
  SPEAKER_00: You have your traditional lodging uh traveler that may be, you know, a consultant in market for three or four days at a time.
• 23:01
  SPEAKER_00: What we have also seen is what we call transitional housing.
• 23:05
  SPEAKER_00: So someone that may no longer be with their family or uh are moving and need another place to stay that's not necessarily their home, so to speak.
• 23:16
  SPEAKER_00: It's a home for now.
• 23:17
  SPEAKER_00: And those end users might be there for three, six, nine, twelve months.
• 23:23
  SPEAKER_00: And so it's fulfilling a need that's quite different than our traditional hotel.
• 23:28
  SPEAKER_00: Um, and it's still, unfortunately, from the financial markets looked at much more on a lodging perspective.
• 23:35
  SPEAKER_00: And this is extended stay that I'm talking about than as a, let's say, multifamily asset.
• 23:41
  SPEAKER_00: But we have seen an understanding of and adoption of a lower risk profile, meaning that that asset performs better, has better flow through.
• 23:54
  SPEAKER_00: And generally with those metrics, you can finance more aggressively, or you see a cap rate.
• 23:59
  SPEAKER_00: So, you know, the price someone's willing to pay and the risk tolerance level decline, meaning the value the asset is worth more, right?
• 24:09
  SPEAKER_00: Because of that stability of income.
• 24:11
  SPEAKER_00: And also, to one of your earlier points, efficiency of operations.
• 24:16
  SPEAKER_00: Typically, in the extended stay and service living, uh, depending on level of service, instead of getting daily housekeeping, sometimes it might be two or three times a week or once a week.
• 24:29
  SPEAKER_00: Um, again, you know, driving bottom line performance.
• 24:32
  SPEAKER_00: And then I think from the branded residences side and service department side, you know, depending on the capital stack of the building uh and the built environment, there are benefits to having what we would call multifamily or apartments in addition to hotel, because multifamily is generally valued more aggressively than lodging.
• 24:57
  SPEAKER_00: And so if you can allocate costs of a new development to various components, it's generally easier to finance today than a single-use building, as an example, that's just hotel.
• 25:10
  SPEAKER_00: Uh, and so there's multiple reasons for that in a fish in addition to just being able to cost share, right?
• 25:16
  SPEAKER_00: You may be able to allocate some of the overhead associated with what may be the lobby or amenity areas to the residential component versus it all being the burden of the hotel.
• 25:28
  SPEAKER_00: It creates a more complex transaction, but there are a number of benefits uh to the owner and or developer that are um that are you know building the the project.
• 25:39
  SPEAKER_02: Yeah, on the branded residence side, the one of the big benefits I see to owners and developers is the initial recapture that you get off those unit sales.
• 25:48
  SPEAKER_02: Uh therein, I'm wondering as a litmus test from the deals you've seen, do you have a rough ratio in terms of what works for a branded residence?
• 25:56
  SPEAKER_02: Uh, the ratio being uh residences to hotel rooms to short-term occupancy stay products?
• 26:04
  SPEAKER_00: I don't have a good answer for you on that, Adam.
• 26:07
  SPEAKER_00: It's a great question.
• 26:08
  SPEAKER_00: It really depends.
• 26:10
  SPEAKER_00: Uh, and and there's a couple of reasons.
• 26:12
  SPEAKER_00: If you look at the Ritz-Carlton Nomad as an example, the unit mix there for of the for sale component is much smaller than, let's say, the Mandarin Oriental in Columbus Circle.
• 26:24
  SPEAKER_00: And so I think it's every product and every project is different.
• 26:28
  SPEAKER_00: It may be governed by uh what you're able to build and the use permits in certain jurisdictions.
• 26:34
  SPEAKER_00: It may be governed by uh the overall economics of the project and a number of other things.
• 26:39
  SPEAKER_00: So I think there's no rule of thumb that I have seen yet.
• 26:43
  SPEAKER_00: Um but if that does become available, I will certainly let you know.
• 26:48
  SPEAKER_02: I I mean, I think that we're still defining how branded residences operate, and there's so many different factors that go into mixed-use real estate to figure that out.
• 26:58
  SPEAKER_02: Um, you know, different markets, legislation, etc.
• 27:01
  SPEAKER_02: But it certainly makes your job more exciting to help figure that out in terms of what will work.
• 27:07
  SPEAKER_00: It does.
• 27:07
  SPEAKER_00: And what's been interesting to see in the US, because we typically think of branded residences as in that luxury subset and super luxury subset.
• 27:17
  SPEAKER_00: So the Amman, New York City, right on Fifth Avenue as an example.
• 27:21
  SPEAKER_00: Uh, we have a client that developed a renaissance in Honolulu that also has branded residences.
• 27:27
  SPEAKER_00: And so being able to see that translate into the upper-up scale segment in the United States is fascinating because it does exist particularly in Asia.
• 27:36
  SPEAKER_00: Uh, and I think that there are some uh some pretty dramatic advantages that we will benefit from as it becomes more normalized, uh, but it's still in its infancy in the United States when it's not a super luxury asset.
• 27:51
  SPEAKER_02: You know, it's very interesting.
• 27:52
  SPEAKER_02: You talk about um the idea of branded residences moving down the chain scale.
• 27:57
  SPEAKER_02: Uh, can you foresee a day where branded residences exist at the upscale and mid-scale?
• 28:04
  SPEAKER_00: I think there are certainly markets where it can be done.
• 28:09
  SPEAKER_02: Yeah, I mean, it's uh we're we're we're defining it as we go.
• 28:13
  SPEAKER_02: I mean, the the trend itself is only a few years old in terms of its name.
• 28:18
  SPEAKER_02: So it really is something that is evolving here and now.
• 28:23
  SPEAKER_02: So um heading into 2026, what are you seeing in terms of overall deal flow and transaction volume?
• 28:32
  SPEAKER_00: The end of 2025 has been a welcome relief, I think, for not just our group, but also for our our competitive set, in that transaction volume has continued to increase, particularly in the half of the the last half of the year.
• 28:50
  SPEAKER_00: And Q4, there's been a noticeable return of capital, both equity and debt capital, to the markets.
• 28:57
  SPEAKER_00: Um in the United States, the international investor had more or less dried up of scale, and that has changed, uh, and notably so in the last three weeks.
• 29:08
  SPEAKER_00: And you know, we're talking here in mid-December.
• 29:11
  SPEAKER_00: Uh why is unclear, but incredibly positive to see them returning to our processes.
• 29:20
  SPEAKER_00: I think that also bodes well for what we're going to see into 2026.
• 29:24
  SPEAKER_00: You know, 2025 isn't a great benchmark because the transaction volume is down so much.
• 29:30
  SPEAKER_00: Uh, so any increase in volume is going to look uh look quite substantial.
• 29:35
  SPEAKER_00: Yeah.
• 29:36
  SPEAKER_00: But from what we're seeing, uh, we expect an incredibly busy uh Q1, Q2 of next year, and that continuing, not just because of the buyer community coming back, but also because of the constructive nature of the debt capital markets.
• 29:51
  SPEAKER_00: So the lending community, yeah.
• 29:53
  SPEAKER_00: We have seen a big return of what we call traditional balance sheet lenders.
• 29:59
  SPEAKER_00: And so those might be your regional and super-regional banks that had really pulled back post SVB.
• 30:07
  SPEAKER_00: Um, they're returning to the space.
• 30:09
  SPEAKER_00: That's important because they generally have pricing that's more competitive than, let's say, the debt funds.
• 30:15
  SPEAKER_00: Um, and then we're also seeing a number of our overseas lenders come back into the space that had been on the sidelines and new debt funds that have been created.
• 30:25
  SPEAKER_00: So each time we see another entrant in the market, it makes for a more efficient market and a deeper pool of investors that helps us either push up proceeds to the dollar amount that you may get, andor push down the cost of capital, so your interest rate, you know, potentially going down.
• 30:43
  SPEAKER_00: And then there's other factors as well.
• 30:45
  SPEAKER_00: Uh the Fed interest rate cut was helpful.
• 30:48
  SPEAKER_00: Uh, I think everyone on our side of the equation hopes there are more of those, uh, which is T to be determined.
• 30:55
  SPEAKER_00: Um, but a lot of good, let's say, momentum in the transaction market.
• 31:00
  SPEAKER_00: And it's not all because people want to sell, uh, a lot of it is also going to be people that have to sell.
• 31:08
  SPEAKER_02: Ah, right.
• 31:09
  SPEAKER_02: The have to sell problem.
• 31:11
  SPEAKER_02: Uh, just to backtrack here, SVB, Silicon Valley Bank.
• 31:16
  SPEAKER_02: Correct.
• 31:17
  SPEAKER_02: Right.
• 31:18
  SPEAKER_02: And uh the amount of uh regional and super-regional banks you're referring specifically to the US and uh in that factor.
• 31:26
  SPEAKER_00: That is correct.
• 31:27
  SPEAKER_00: Okay, right.
• 31:28
  SPEAKER_00: The United States is is interesting because if you look at the United States banking market versus that of our global peers, we have far more lending institutions um than any of our peer set globally.
• 31:42
  SPEAKER_02: Yeah, and it's uh I mean we could spend another half an hour listing off a lot of those regional banks, and the SVB incident uh was uh it it had the potential to be a contagion in a lot of ways, which would have hurt the process uh even further for uh financing.
• 32:01
  SPEAKER_02: Yeah.
• 32:02
  SPEAKER_02: So we're heading into 2026.
• 32:06
  SPEAKER_02: Structurally speaking, how are hotel deals different now than what they were two years ago or uh the deals that occurred uh in the wake of the pandemic?
• 32:20
  SPEAKER_00: It's materially different for a couple of reasons.
• 32:24
  SPEAKER_00: I would say that there has now been an acknowledgement that value is value.
• 32:28
  SPEAKER_00: Two or three years ago, a number of our sellers were holding out for higher valuations.
• 32:35
  SPEAKER_00: Uh there's been a realization that the market is more or less flat, um, if not some compression, right?
• 32:43
  SPEAKER_00: And then that's in a static environment, meaning let's say our NOI is relatively flat.
• 32:48
  SPEAKER_00: Yeah, you know, that's number one.
• 32:51
  SPEAKER_00: Uh, we have seen continued liquidity, as I mentioned uh immediately prior, in the debt capital market space.
• 33:00
  SPEAKER_00: So lenders are showing up, which means it's easier to get things financed.
• 33:05
  SPEAKER_00: I think buyers are realizing that they're also sitting on uh quite a substantial amount of capital that needs to get put to work.
• 33:13
  SPEAKER_00: And so they want to deploy, they can see that there is a way to lever their transactions, so to borrow on those transactions, uh, and that's helping uh create more transaction volume.
• 33:25
  SPEAKER_00: And we're also seeing sellers more willing to do creative things that may not have existed two or three years ago, meaning providing seller financing.
• 33:35
  SPEAKER_00: So if you and I are at differing price points, I being seller, you being buyer, I might offer you, Adam, seller paper.
• 33:45
  SPEAKER_00: So you're getting to$65 million on your purchase or on your loan for the purchase.
• 33:52
  SPEAKER_00: I might say, I'll take you to$75 million.
• 33:55
  SPEAKER_00: So you don't have to write as large of a check.
• 33:57
  SPEAKER_00: Maybe I give it to you at a below market rate.
• 34:00
  SPEAKER_00: So your returns to your equity go up and bridge the gap that way.
• 34:05
  SPEAKER_00: We've seen some of that.
• 34:06
  SPEAKER_00: Um, and then I also think that uh there are a number of our larger clients that have had legacy assets, meaning hotels, resorts, what have you, that they've held for a long time.
• 34:19
  SPEAKER_00: And you're running into an opportunity cost problem, meaning my entire team is focused on asset managing this transaction, which may only grow by a couple of points in value over the next year or two.
• 34:34
  SPEAKER_00: Does it make sense to cut that asset loose today, redeploy capital into a new asset?
• 34:40
  SPEAKER_00: My team now can focus on building value in that asset and hopefully, you know, uh developing outsized returns.
• 34:49
  SPEAKER_02: Hmm.
• 34:49
  SPEAKER_02: Yeah, I mean, it's um that's the art of the deal right there, is figuring all that out and uh sellers financing.
• 34:56
  SPEAKER_02: I have seen a lot of that occurring, even however privately it's it's done.
• 35:01
  SPEAKER_02: What was news to me from what you said is that sellers financing is occurring below market rates in a lot of places.
• 35:08
  SPEAKER_02: And uh certain circumstances, definitely.
• 35:10
  SPEAKER_02: Yeah.
• 35:10
  SPEAKER_02: Yeah, that's that's interesting to hear.
• 35:12
  SPEAKER_02: Generally, uh the seller's financing can be oftentimes a bit userous in terms of the rates, but uh you know, we don't need to get into the actual uh math to make all that work and add up all that debt service.
• 35:26
  SPEAKER_02: Um one thing related to debt service and the structure of a deal, how are you seeing loan-to-value ratios change over the past few years and changing according to each uh hotel category?
• 35:40
  SPEAKER_00: Yep, great question.
• 35:42
  SPEAKER_00: Uh the you know, when when capital is scarce, loan to values generally remain fairly constant.
• 35:49
  SPEAKER_00: So, you know, to use the example of our balance sheet banks uh in from our prior uh question, they may have been 50 to 60 percent loan to value uh if they showed up to a process, right?
• 36:02
  SPEAKER_00: So relatively conservative.
• 36:04
  SPEAKER_00: In the United States, typically banks can go to 65% loan to value.
• 36:08
  SPEAKER_00: And by banks, I mean your traditional um depository institutions.
• 36:13
  SPEAKER_00: Uh the debt fund subset of the market, which has historically fluctuated from call it 65 to even 85 percent of value on a loan-to-value basis, were for the last two, three years capping out at 70 percent, maybe, maybe 75.
• 36:34
  SPEAKER_00: We've seen them start to increase.
• 36:37
  SPEAKER_00: Um, the available availability of what we call preferred equity, which is a it's it's similar to mezzanine financing, which is really a tranche of debt, that has become more prevalent uh as lent as equity investors, lenders are seeking uh yield and to deploy capital.
• 36:57
  SPEAKER_00: And so those LTV thresholds have increased.
• 37:01
  SPEAKER_00: Um, and I would say all of that benefits us collectively, you know, on this call, globally from a lodging perspective, because it means that there's more ability to figure out how to make the math within a deal work.
• 37:18
  SPEAKER_00: Um and it also helps, let's say, a borrower that may need to refinance a loan do so without having to sell, right?
• 37:28
  SPEAKER_00: So there's more ways to craft a solution uh to a problem than may have existed previously.
• 37:37
  SPEAKER_02: Yeah, the the key word I I would that comes to mind is just flexibility and they're in liquidity in a lot of ways.
• 37:45
  SPEAKER_02: And uh competition, go on.
• 37:47
  SPEAKER_02: Oh no, just uh go ahead.
• 37:49
  SPEAKER_00: I'll I'll I'll to pick out a point later.
• 37:52
  SPEAKER_00: Uh the other component that I was gonna say is competition in our view always helps transactions.
• 37:57
  SPEAKER_00: So the fact that we have a bigger competitive field just helps everyone in the space.
• 38:03
  SPEAKER_02: Yeah, no, that's an incredibly valid point.
• 38:06
  SPEAKER_02: Um, to pull out Prefec, preferred equity in terms of helping get deals done.
• 38:13
  SPEAKER_02: Can you describe some of the terms that you're seeing uh that the preferred equity partner would look for uh and what you're seeing that really helps to get the deal done that's also fair to other people involved in a venture?
• 38:27
  SPEAKER_00: Certainly.
• 38:28
  SPEAKER_00: Preferred equity is is unique because you generally don't have a defined uh repayment period.
• 38:35
  SPEAKER_00: I mean, there may be penalties if you don't prepay in a certain period of time.
• 38:39
  SPEAKER_00: And we generally see it in situations where the seller uh may have a value expectation of X, and the buyer may have a value expectation of Y, which is less than X.
• 38:54
  SPEAKER_00: The debt markets, the preferred equity investment community may be comfortable at Y, right?
• 39:00
  SPEAKER_00: That that lower value as a last dollar, and you as owner may be comfortable with the valuation you have set.
• 39:08
  SPEAKER_00: So it allows for an owner to retain their property.
• 39:13
  SPEAKER_00: Um, the returns in today's market are still equity-like versus mes.
• 39:19
  SPEAKER_00: So you're you know, upper teens, maybe even 20% returns, depending on how it's structured.
• 39:26
  SPEAKER_00: You usually have similar to mezzanine debt fees up front and maybe an exit fee.
• 39:32
  SPEAKER_00: Sometimes there may be a participation component.
• 39:35
  SPEAKER_00: So what that means is you provide the capital, or our pref equity investor provides our capital.
• 39:43
  SPEAKER_00: Um, we ramp or stabilize the asset and then we sell it for 20% more.
• 39:49
  SPEAKER_00: That investor may participate in that increase in value.
• 39:53
  SPEAKER_00: So maybe they get 5% of that increase, 10% of that increase.
• 39:57
  SPEAKER_00: Um, there's a number of different ways to structure pref equity in today's market in order to try and make sure that we have a meeting of the minds on both sides.
• 40:06
  SPEAKER_00: And obviously, as you get closer to the actual value of the asset, um those metrics increase because the risk factor increases.
• 40:16
  SPEAKER_00: Does that answer your question?
• 40:18
  SPEAKER_02: It it does.
• 40:18
  SPEAKER_02: And of course, it speaks to the complexity of these deals.
• 40:22
  SPEAKER_02: And we didn't even mention anything like waterfalls or uh, you know, the private equity two and twenty that can go into a lot of how these how these JVs are structured.
• 40:32
  SPEAKER_02: So um I hope it's just clear for audience how complicated things can get behind the scenes and uh the art of the deal, but the science of it and the mathematics of it to make sure all parties are happy with an agreement going forward.
• 40:46
  SPEAKER_00: Excel is one of my best friends.
• 40:49
  SPEAKER_02: I think Excel is everyone's best friend.
• 40:53
  SPEAKER_02: Um so they're in to structure these deals, to make it all work, to make it work on paper, to keep all parties happy.
• 41:01
  SPEAKER_02: It's not just you, it's a whole team.
• 41:04
  SPEAKER_02: And therein, we have Collier's hospitality platform that we should talk about and a lot of the key hires that uh have been put in place to really round out the team to bring that knowledge base forward to help advise hotels.
• 41:20
  SPEAKER_02: So I'm wondering if we could shift gears and look at how the hospitality platform has evolved under your leadership.
• 41:27
  SPEAKER_02: And could you start by walking us through the strategy behind uh building and scaling it?
• 41:32
  SPEAKER_00: Sure.
• 41:32
  SPEAKER_00: And I really appreciate that comment because it's it's a hundred percent correct.
• 41:36
  SPEAKER_00: It's not just me, it is the team.
• 41:38
  SPEAKER_00: Um you know, we are focused on uh growth and development in the lodging space uh and doing it really with a group of individuals that are hardworking, that are smart, uh, so that we can lead the overall uh industry.
• 41:55
  SPEAKER_00: And my objective and our objective is to become one of the leading hospitality advisors, not just in the US, but globally.
• 42:01
  SPEAKER_00: And so I think we're being very thoughtful and intentional with our growth approach, and that's starting with good people.
• 42:08
  SPEAKER_00: Um, you know, it's removing the barriers that may exist between them and other teams, right?
• 42:15
  SPEAKER_00: So trying to bring all of the teams together to work cohesively.
• 42:19
  SPEAKER_00: Uh, and that's across sort of the transaction spectrum.
• 42:23
  SPEAKER_00: So in certain circumstances, you have the equity side of the equation siloed, the debt side of the equation siloed, and to get deals done in the most efficient manner manner, which to me and to our team means at the best price for our client, is to really have those two teams merge and be able to speak to the equity, to be able to speak to the debt.
• 42:45
  SPEAKER_00: And that's a discipline that's not necessarily easy for a lot of people.
• 42:49
  SPEAKER_00: So it's identifying those individuals that understand the value that's created by doing that, and then creating that environment that fosters the collaboration for everyone to come together and figure out what is best for the client.
• 43:01
  SPEAKER_00: How do we structure it?
• 43:02
  SPEAKER_00: Maybe an investment sale isn't the right solution.
• 43:05
  SPEAKER_00: Maybe it's taking out a partner that wants to be repaid, but there's still substantial value to be unlocked.
• 43:12
  SPEAKER_00: So having that team that can talk through the different scenarios and listen to our clients is really important.
• 43:18
  SPEAKER_00: And then leveraging off of each other's knowledge, uh, and that knowledge may be structured finance.
• 43:25
  SPEAKER_00: It could be how international equity is looking at things, it could be knowledge of the client.
• 43:31
  SPEAKER_00: Uh, so there's a variety of things that come into that uh that's really important.
• 43:35
  SPEAKER_00: And my job here is just to make sure that we're helping foster that uh that growth among our team members and also joining that in the United States with those of our team members overseas.
• 43:48
  SPEAKER_00: So I spend a lot of time with our teams in Europe, in APAC, and beyond, um, making sure that all of us are connecting and sharing information to get the best possible outcome.
• 44:00
  SPEAKER_00: comes for our clients.
• 44:01
  SPEAKER_02: Yeah, you know, I love that you mentioned the word collaboration because uh hotel operations is collaborative, construction is highly collaborative, and so is so is the acquisition and the structuring of any of any refinance or uh or capital raise.
• 44:17
  SPEAKER_02: It is all collaborative and it all comes down to working together and having a very strong team that you can divide work but also discuss the opportunities and the and the best approach.
• 44:30
  SPEAKER_02: So therein I'm wondering um if you wanted to mention any no any recent hires uh that you've had for the US side of the hospitality platform and your strategic thinking behind those hires.
• 44:42
  SPEAKER_00: Certainly no I appreciate that.
• 44:44
  SPEAKER_00: You know well we most recently added Andrew Healy in Atlanta who has an investment sales and structured finance background worked at a servicer as well so brings a number of different pieces to the equation from understanding how the investor community the lender community and you know the distress side of the equation work.
• 45:05
  SPEAKER_00: We've added Hannah Friedman in New York who's a terrific ad um on the investment sales side uh and is a Cornell grad that has incredible connections within the industry and just a solid hardworking individual.
• 45:20
  SPEAKER_00: Scott Hutchinson recently joined us in Boston another terrific ad uh that knows the Northeast really well.
• 45:28
  SPEAKER_00: And so it's looking at number one, you know, who are smart people that want to be able to grow um within an environment that kind of fosters that right uh and each of those individuals that I just mentioned added add on to our existing team.
• 45:44
  SPEAKER_00: So Matt Novichik who was from JLL previously has been a phenomenal ad.
• 45:50
  SPEAKER_00: And that ties into working with our other teammates like Helen Xaver in Atlanta you know we have Estella Wong who's in New York John Avanzino obviously is a great and has been a longtime colleague of mine and prior firms.
• 46:05
  SPEAKER_00: And then merging them in with Prashant Merchant and his team who have been with Colliers since prior to my arrival and Dharmes Patel on the West Coast.
• 46:14
  SPEAKER_02: So you know figuring out all right who's going to be a creative how is all of that going to be a force multiplier and making sure that we're all connecting and collaborating together on you know transactions across the country and candidly overseas you know it's it's uh this whole idea of a force multiplier it speaks to the entire industry as a whole where in the 80s and 90s people were talking about you know oh getting being more efficiency efficiency uh downsizing all these various terms but really what we're seeing now is the investment in talent is the way forward to realize that force multiplier whether it's on the operation side where you know going back to that whole idea of super luxury or ultra luxury is their staff to guest ratio can be three or five to one, right?
• 47:08
  SPEAKER_02: And we're now we're now what you're saying is that in order to realize your Collier's long-term commitments to the hospitality sector it all comes back to that investment in talent and allowing to enable true collaboration and I'm wondering if you could speak to how Collier's long-term commitment to investing in talent speaks to confidence in the industry as a whole certainly I think when you look at the Collier's platform it's always been entrepreneurial and over the last 30 years we've delivered to our shareholders and our our investors you know 20 plus on average percent returns which is pretty incredible.
• 47:48
  SPEAKER_00: And I think that that commitment to growth and and the entrepreneurial spirit is something that drew me to the firm.
• 47:55
  SPEAKER_00: And what I find fascinating is for being as large as we are in the US the hotel space is still in its infancy.
• 48:02
  SPEAKER_00: And so the ability to capitalize on that by bringing in the right people to help grow that part of our business is incredibly valuable, particularly at a time where we have had transaction volume over the last two, three years down dramatically.
• 48:18
  SPEAKER_00: And so you know there are a number of individuals I think out there that understand a bigger growth plan and strategy and also a smart growth strategy that gives everyone runway to you know continue to build themselves and their collective practice along with our team to take it to the next level.
• 48:38
  SPEAKER_00: And so we have the distinct benefit of number one penetrating a market that we haven't penetrated historically and the tailwinds associated with transaction volume picking up.
• 48:49
  SPEAKER_00: So hopefully that also results in not to use force multiplier too often the ability to grow at even greater uh leaps and bounds than maybe some of our competitors do.
• 49:00
  SPEAKER_02: Well it's definitely uh very very optimistic going forward and I love hearing about your uh the entrepreneur entrepreneurial entrepreneurial spirit uh of your team um and that is a good segue into our next uh topic to really drive down to innovative brands and the trends you're seeing around those brands so I'm wondering to give us a picture can you speak to any particular brands that you find innovative either in North America or in Europe or in Asia and what features amenities or operations are helping make them innovative and exceptional innovation comes in all shapes and sizes so it's a tricky situation it's tricky a question to answer and we could probably spend you know another podcast on that alone.
• 49:56
  SPEAKER_00: I think to try and distill it a little bit I'll give you a couple of examples and and some of the reasons why first is we talked about Amman.
• 50:04
  SPEAKER_00: I think they've been incredible at creating destinations that none of us may have ever heard of before and bringing attention to that and tying into that experiential traveler right that's something that takes a lot of innovation and also appetite for risk.
• 50:22
  SPEAKER_00: Graduate hotels I think is another great uh example you know they captured the ethos of universities and and the towns in which they lie and then we're able to effectuate a phenomenal transaction selling the brand itself and allowing you know Hilton to take it to the next level.
• 50:40
  SPEAKER_00: I think auto camp something that we've all done and heard of when we were growing up and even today camping but bringing that comfort level to what may have not appealed to the broader subset and giving them that experience to be outdoors and camping without necessarily having to worry about a tent.
• 51:05
  SPEAKER_00: And we had the very uh fortunate uh uh benefit of being a part of their growth team um at Inception but they were incredibly technology focused before others were and really developed a whole backbone around that uh and also were committed to building modular when others weren't so taking not just traditional technology but building technology to a new level uh so I would put them in the classification of innovator you know and then we have our big brands like Marriott is always thinking through new ways to enhance the guest experience to bring technology together I think what was fascinating is Hilton putting in basically a seat map right we're all used to choosing our seat on an airplane you can now choose your room through the Hilton app on floor plans.
• 51:59
  SPEAKER_00: Now I think the biggest trick with all of this Adam uh is going to be mastering all of these different tools and options but giving the guests the ability to interact with it the way that they want to and I think you and I can probably both agree we may have family members that don't care if there's an app, they're gonna want to push zero and ask and have someone bring them a burger when they want that burger.
• 52:24
  SPEAKER_00: So how do you stay innovative and yet accommodate that as well I think that's going to be our challenge.
• 52:32
  SPEAKER_00: Yeah and and you know you mentioned the innovation of the major brands um and of course Citizen M uh sold to Marriott recently um so therein there's this big debate right now and it's probably a 30 year old debate of uh independent or small brand versus major chain in terms of the investment side in terms of selecting a brand and the major chains give you they give you the app they give you the technology they give you the distribution the marketing support but they also take fees technology licenses uh franchise fees etc uh without getting uh choosing a side can you uh walk us through your process for how you would decide uh what to go with for a given owner or developer who's thinking about going independent small brand versus um signing on uh a major hotel chain there are so many variables that come into that decision Adam whether it's the technology side the marketing side even the brand standard side and so I think there's let's we'll break it down into a couple of components the cost of guest acquisition is really one of the components can I get to my target audience without having this brand some people are able to do it via public relations media campaigns etc and just their databases others may not have that uh that ability and then it's tied into can I keep that guest going forward?
• 54:15
  SPEAKER_00: So if you come and stay with us, do I have the tools and the systems in place to make sure that you're comfortable and want to come back right some organizations may have that ability others may not and so we take a broad look at the spectrum of those components and our client and what they want to accomplish before we ever pursue a marketing be it for an investment sale or for uh a debt or equity raise because if we can't answer any of those questions in an efficient manner it generally means we have to think through the strategy.
• 54:53
  SPEAKER_00: Do we need a partner with Marriott?
• 54:56
  SPEAKER_00: Maybe it's an autograph because our client has a very distinct vision of what the asset is or can we create our own destination and by the way our client has done it 30 times before all with independent hotels it's really kind of that analysis that that drives the decision.
• 55:14
  SPEAKER_00: So it's unique to each potential investor.
• 55:17
  SPEAKER_02: It is and again that speaks to the investment and talent that you've that you've executed because uh that those decisions require a very large um wherewithal of where the market is and where each specific brand is relative to that market.
• 55:37
  SPEAKER_00: So therein uh I'm wondering just in a general sense based on what you've seen how receptive are capital markets to uh opting for independence or small groups versus uh really wanting a flag to give to give them that sh that surety uh of their of their investment the market has evolved quite a bit since I first started in the business 25 years ago so that's positive the hotel capital markets are are and can be are and can be very constructive in new brand concepts uh but they can also be really harsh critics so it's balancing and understanding what drives that I think first uh the first time is always the hardest right if you are a pioneer in the industry proving yourself you may believe in it but getting the the capital sources be it the equity or the debt to believe in it is really really important we assisted an airline company in developing their first resort and we did that by using all of their data in order to get the lending community comfortable with the fact that we have and know all of our consumers there are very few options within these submarkets and we're able to get those hotels financed with that technology and that information I think if the individual or group has created a brand successfully previously the conversation is very different than we're creating it on our own today.
• 57:13
  SPEAKER_00: What is the overall market look like are there other branded assets?
• 57:18
  SPEAKER_00: Are there only independents how are they performing?
• 57:21
  SPEAKER_00: I think one really innovative company to one of your prior questions and a good example that answers this is the Kessler collection.
• 57:30
  SPEAKER_00: You know they had and have an incredible knack at identifying markets with incredibly affluent travelers that don't have quality lodging product.
• 57:41
  SPEAKER_00: And at the beginning a lot of those markets are and were considered pioneering uh once they established that proof of concept and the ability to either tap into or create that market, they were able to very successfully roll out a number of unique upper upscale slash luxury lodging experiences to the end consumer in markets that may have been head scratchers for people.
• 58:06
  SPEAKER_00: And that success is underscored by the fact that Marriott found synergies with them and ultimately used them to help launch the autograph collection.
• 58:14
  SPEAKER_00: So talk about innovation but also addressing your question on how receptive capital markets can be to innovation it also depends on liquidity in the market.
• 58:25
  SPEAKER_00: If we're in a market where we have a lot of lenders it's easier to find that one group that may find and believe in your concept versus two lenders that you know are nervous because it doesn't have a Hilton or an intercontinental hotels flag on it.
• 58:42
  SPEAKER_02: Yeah again it's uh it's a complex world and it's a bit of a dance in a lot of ways to find the right partner um to pick out a thread of what you said about uh the airline company that deployed a hotel and they used data to support uh their feasibility um now what I'm seeing is that the technology assets the intellectual property be it a combination of the guest data the technology ecosystem both physical and uh IT systems is now being incorporated into the total value equation for a given property and a given uh brand are you seeing that investors and financiers are taking the the IP the intellectual property into account in terms of how they value a given uh given asset the benefit is all of that to your earlier comment ties into the brand and so that may actually be why an investor or a lender gravitates to one brand versus another it may also be why an investor lender is comfortable with an operating group that has their own quote unquote brand profile um but also has all of that data and information.
• 59:58
  SPEAKER_00: So I think it it ties back to our earlier uh conversation around have we done it before?
• 1:00:05
  SPEAKER_00: Um is the data in-house or outsourced and how is that data accessed?
• 1:00:11
  SPEAKER_00: But candidly ever since I started in this business there's always conversations around IP uh and what that means even you know in early 2000s when uh when you're looking at purchase and sale agreements more so than on the debt side but um and it's always a negotiation.
• 1:00:32
  SPEAKER_02: Yeah I know it's it's it's very um humbling to hear that you phrase it and and sort of looked at it on a 20 and 30 year cycle where intellectual property is really nothing new.
• 1:00:44
  SPEAKER_02: It's just it's always been a part of of how we look at deals and how we look at structuring um the capital stack from whatever the buyer or seller is trying to do um so now I'm gonna ask a uh a hard or a charged question.
• 1:01:03
  SPEAKER_02: Right now a lot of people are saying that there are too many hotel brands what do you think I think it's a great question and one for a lot of debate.
• 1:01:16
  SPEAKER_00: Yeah I think the brand families have been very good at figuring out niche audiences.
• 1:01:23
  SPEAKER_00: And there are markets where the Ned may be great a great product and a great option there are other markets where it may not really fit.
• 1:01:34
  SPEAKER_00: And so I think that the brands have been very savvy at understanding how to try and target every type of consumer that may exist.
• 1:01:45
  SPEAKER_00: The question of whether there are too many or not I think is yet to be seen.
• 1:01:50
  SPEAKER_02: Yeah I know it's um it will take some time for that to play out and uh therein we can move into our final section talking about the future and what you're seeing based on your experience.
• 1:02:02
  SPEAKER_00: So looking ahead to the end of uh the 2020s and then into the 2030s what what big trends are you seeing uh in the hotel world well I think we're we're on a continued trend for transparency in the industry which you know from a consumer perspective is great candidly from my perspective and as an advisor it's terrific because we can understand and assess things uh faster and better um you know when I think about the pre-internet hotel age where we relied on either travel books or travel agents uh and candidly maybe the brand right or the trust in that brand I think the internet has created avenues to explore and learn about hotels and resorts that are far more meaningful to the individual consumer versus uh that of let's say the travel agent community social media and how that continues to evolve and influence our business I think is really interesting.
• 1:03:01
  SPEAKER_00: I'm trying to stay relevant as I get older in in monitoring and understanding that because it is starting to slip away um and I think that experiences is the next evolution so that's taking over really what the brand is and so it behooves all of us to figure out how do we capture that room business and stay and keep it relevant when someone may be to your earlier point wanting to go on a safari.
• 1:03:32
  SPEAKER_00: You know I think there's there's some interesting evolutions of uh of the loyalty programs that are attempting to do that.
• 1:03:41
  SPEAKER_00: I'm intrigued to see how AI uh is impacting the search side of the equation and how hoteliers be it brands or managers can master their properties showing up in AI searches.
• 1:03:59
  SPEAKER_00: I think this is going to be an evolving landscape and I don't know how quickly we'll have an answer to that but it's something that I lose sleep uh at night about because it is relatively opaque.
• 1:04:12
  SPEAKER_00: So completely in contrar contrast to the transparency we've generated elsewhere.
• 1:04:18
  SPEAKER_00: And I think that all of that just basically ties down to our bottom line performance.
• 1:04:23
  SPEAKER_00: And that then ties to our valuations, right?
• 1:04:26
  SPEAKER_00: And so an example like I mentioned earlier is a lot of this transparency and search has created data that is helping developers build products that make more sense for that market like we had talked about how AI impacts the search process and keeps that new property relevant, I don't have an answer to and I think a lot of very smart people are trying to figure out yeah I mean it's uh it reminds me of the early days of SEO search engine optimization where it was essentially people trying to uh try trying to speculate on uh what the weighting factors were in in the Google search algorithm and then now we have this extra layer on top in terms of AI search and AI search optimization and making sure your website is readable and all that fun stuff that by the time we figure it out uh we'll be moving on to the next thing in terms of uh how customers are finding us um right to tie back to uh a point you you mentioned earlier is is this transition and this growth of just mixed use uh real estate overall and it's almost like we're seeing the blend of uh residential multifamily retail office hospitality maybe even light industrial at some point I don't know but what are you seeing uh in terms of uh the trends within
• 1:06:00
  SPEAKER_02: Mixed use development that get get you excited, and um how do you see these adding value to owners or developers?
• 1:06:09
  SPEAKER_00: Mixed use development is really interesting because the more I thought about this question and and our conversation, you know, it is sort of the mantra what's old is new again.
• 1:06:19
  SPEAKER_00: Um, and it it ties a lot to what's available in the capital markets.
• 1:06:25
  SPEAKER_00: If I can't build a standalone hotel as an example today, how do I make that piece of real estate valuable?
• 1:06:33
  SPEAKER_00: Do I add residences, uh, be it for rent or or for sale?
• 1:06:38
  SPEAKER_00: Do I add a hotel or an office component to that hotel?
• 1:06:42
  SPEAKER_00: So I think we are in um a phase again where in order to make things work from a financial perspective in today's market, you're going to have to have those other pieces uh to make the project viable.
• 1:06:56
  SPEAKER_00: So that's number one, right?
• 1:06:58
  SPEAKER_00: Viability and just being able to build it is the first case.
• 1:07:02
  SPEAKER_00: The second case is really the hotelization of everything, um, which I think is really good for all of us.
• 1:07:08
  SPEAKER_00: You look at office buildings, getting people back to the office is being done by giving more amenities to the tenants and making people want to be there.
• 1:07:17
  SPEAKER_00: Um, so I think we're in a in a it ties to experiential travel.
• 1:07:22
  SPEAKER_00: Again, it's bringing experiences to our lives consistently and maybe not just in the sense of travel.
• 1:07:30
  SPEAKER_00: That is where I think the evolution is going to continue.
• 1:07:34
  SPEAKER_00: Um, and I do think that there's tremendous value to be added uh by having these other components for some of the points that we talked about previously.
• 1:07:43
  SPEAKER_00: If you can lay off costs to other divisions within that building rate, uh, how do you make the real estate the most efficient it can be?
• 1:07:54
  SPEAKER_00: You know, that works for everyone.
• 1:07:56
  SPEAKER_00: You know, it makes the lender more comfortable, it makes investors more comfortable.
• 1:08:00
  SPEAKER_00: I think what is fascinating to see in the United States as an example versus let's say overseas is we tend to also have very specialized investors.
• 1:08:12
  SPEAKER_00: And so you may have an investor that is really just focused on a hotel.
• 1:08:17
  SPEAKER_00: And if that hotel is in a big missed use, mixed-use building, can you monetize it?
• 1:08:24
  SPEAKER_00: Does it need to be structured in a different way?
• 1:08:26
  SPEAKER_00: Versus, let's say, a longer-term holder overseas that likes the diversification of income streams and doesn't care if they sell it tomorrow or hold it for the next 30 years.
• 1:08:37
  SPEAKER_00: And that's where I think the um difference that we see in the United States in particular versus other markets is important and why we don't necessarily see as many of these mixed-use buildings here as we see elsewhere.
• 1:08:55
  SPEAKER_02: But it will eventually come here and uh and then that will influence uh what brands, what what deal structures are here, and then that will of course influence what happens overseas in other markets as well.
• 1:09:08
  SPEAKER_00: It's really branded residential.
• 1:09:10
  SPEAKER_00: I mean, it's it's phenomenal.
• 1:09:11
  SPEAKER_00: It makes many, many projects work in today's market.
• 1:09:15
  SPEAKER_00: And you look at you know what's being built uh or going to be built on the other side of Grand Central, and that mixed use, phenomenal redevelopment of the Hyatt, um, you know, you're gonna have a variety of uses that now make it financially viable.
• 1:09:30
  SPEAKER_00: Where if it was, let's say, just a hotel, it may not necessarily be the highest and best use of the land today.
• 1:09:36
  SPEAKER_02: Yeah, you it's it's so interesting you mentioned that project.
• 1:09:39
  SPEAKER_02: The um it was a it was the Grand Hyatt, I believe, uh around four how how many how many keys was it?
• 1:09:48
  SPEAKER_00: Oh gosh, we're gonna have to I'm gonna have to get back to you on that.
• 1:09:51
  SPEAKER_00: I don't want to describe it it's it's substantial and it's gonna be substantially less, right?
• 1:09:55
  SPEAKER_00: Just like the you look at the Waldorf Astoria.
• 1:09:58
  SPEAKER_00: I mean, that has been de-keyed as well to a level that I think we'll be able to get some pretty phenomenal rates.
• 1:10:05
  SPEAKER_00: Uh but I think I'll have to get back to you on what the old versus new Hyatt is.
• 1:10:10
  SPEAKER_02: Yeah, you know, I wasn't expecting to drill into the specific project, but the de-keying does speak to a larger trend where you have this traditional place where people would need rooms in and around the two-block radius of of Grand Central Station in New York.
• 1:10:27
  SPEAKER_02: And the de-keying, both to speak to people that want a more experiential product, like the Waldorf Restoria relaunch, um, or what's going to happen to the Hyatt Hotel and the mixed-use development, and then how that opens up um opens up the inventory gap in New York to allow for other hotel projects to uh to get underway.
• 1:10:48
  SPEAKER_02: Exactly.
• 1:10:49
  SPEAKER_02: Yeah, it's a very beautiful, complex, uh, and increasingly fun uh world.
• 1:10:56
  SPEAKER_02: Um so to close out, I want to ask you about one other aspect that enters the conversation, and that is the uh talks about sustainability, um both from the uh increased pressure to uh incorporate capital assets that uh are involved in meeting certain uh energy efficiency standards, as well as the branding side, where certain brands are becoming are using sustainability to attract guests of a certain mindset across different demographics.
• 1:11:38
  SPEAKER_02: Um what what are you seeing uh in terms of this changing perception uh in terms of how capital markets are interpreting sustainability into their valuations?
• 1:11:51
  SPEAKER_02: And then as well, um uh I'm wondering if you wanted to speak to any other uh funding instruments like C-Pace financing that are related to sustainability.
• 1:12:01
  SPEAKER_00: Adam, we're gonna need another podcast on this because it's a great question, and I will try my best to make it as succinct as possible.
• 1:12:09
  SPEAKER_00: Um, but there are three real main constituents in this equation, and it's the government, it's the consumer, and it's the investor.
• 1:12:17
  SPEAKER_00: And so if we look at Europe as an example, you know, there's aggressive regulation on the ESG front, and that's going to dramatically impact viability for a number of assets just via penalties for noncompliance.
• 1:12:30
  SPEAKER_00: And so that's a driving force uh in particular overseas.
• 1:12:35
  SPEAKER_00: But what's interesting is the European consumer has also uh been acutely aware of ESG and is adapted to that.
• 1:12:44
  SPEAKER_00: So you're seeing a shift to you know consumer behavior tied to that.
• 1:12:49
  SPEAKER_00: And I do think that that's also prevalent overseas and domestically as well, maybe not everyone, but there is uh that sort of shift in mindset that, to your point, may drive a consumer to one hotel versus another.
• 1:13:04
  SPEAKER_00: So it's going to have an economic impact on the bottom line as uh people seek out ESG more aggressively.
• 1:13:12
  SPEAKER_00: Um, and then the third component is the investor.
• 1:13:16
  SPEAKER_00: And this is fascinating because it spans the globe.
• 1:13:21
  SPEAKER_00: Um, if you look at uh green bonds overseas, there is a desire to invest in those, which creates a deeper market for debt and more liquidity in the system, which means it may not necessarily be cheaper, but you'll be able to get proceeds from the you know, money from a variety of a bigger variety of investors, and therefore kind of spurs additional uh growth in that subset.
• 1:13:50
  SPEAKER_00: In the US, you know, we've had CPACE, as you mentioned.
• 1:13:54
  SPEAKER_00: It started around 2010, so we've got you know 15 years of CPACE, and it has also evolved pretty dramatically uh from its onset and become a bit more commonplace.
• 1:14:07
  SPEAKER_00: Uh, and it does help facilitate projects that may have been cuspy from a return perspective.
• 1:14:13
  SPEAKER_00: So I think there's a value to it um in a number of different areas, uh, but it's incredibly complex.
• 1:14:22
  SPEAKER_00: And in the US, as an example, C-Pace can also be detrimental to a project because certain lenders just may not want to lend behind it.
• 1:14:30
  SPEAKER_00: So every component really is thought through when it comes to the that last subset, like that investor subset.
• 1:14:38
  SPEAKER_00: Um, in making sure, you know, if for example, we're working on a project that has C-Pace financing, making sure from our perspective that it also works without C-paste financing.
• 1:14:49
  SPEAKER_00: And if it doesn't, why?
• 1:14:51
  SPEAKER_00: So that we can pivot and advise our client in the best manner to get a deal done.
• 1:14:57
  SPEAKER_00: Um so it's a it's a fascinating subject.
• 1:15:00
  SPEAKER_00: I think the United States has taken our foot off the gas when it comes to ESG requirements.
• 1:15:06
  SPEAKER_00: But I do think that the consumer has already evolved.
• 1:15:09
  SPEAKER_00: Um and ultimately it's dollars and cents.
• 1:15:12
  SPEAKER_00: If you have someone that's willing to give you money because you're doing it and that's what gets the deal done, that's what people are gonna do.
• 1:15:19
  SPEAKER_02: Yeah, and that's a great way to finish off is you know, the consumer demand is gonna drive a lot of these deals and a lot of the new developments, and it's incredibly interesting to uh to look at.
• 1:15:32
  SPEAKER_02: Um, so Mark, um, before we close out, or is there any other uh important trends or information about Colliers that you'd want to add?
• 1:15:42
  SPEAKER_00: No, Adam, I I I appreciate the time and I think we covered a lot of ground today.
• 1:15:48
  SPEAKER_00: Um really great conversation, uh, a lot of fun.
• 1:15:51
  SPEAKER_00: And you know, colliers were we're continuing to grow.
• 1:15:54
  SPEAKER_00: I think we've got a great team both domestically and abroad.
• 1:15:57
  SPEAKER_00: And I know I and the team, the team and I really appreciate being uh being a part of your program and and giving us the ability to to meet today.
• 1:16:06
  SPEAKER_02: Oh, it was uh fantastic.
• 1:16:08
  SPEAKER_02: We did cover a ton of ground, but basically a masterclass in uh in hotel economics and uh and the trends affecting affecting hotels.
• 1:16:19
  SPEAKER_02: Mark, I can't thank you enough.
• 1:16:21
  SPEAKER_02: Just a fantastic, fantastic time discussing hotels and uh everything that you're doing at Colliers.
• 1:16:28
  SPEAKER_02: Thank you.
• 1:16:29
  SPEAKER_00: Thank you.
• 1:16:29
  SPEAKER_00: It's been a pleasure, Adam.
• 1:16:30
  SPEAKER_00: I look forward to seeing you soon.
• 1:16:32
  SPEAKER_00: Thanks.