JRK Property Holdings Inc. is upgrading its status in the hotel category.
The Brentwood-based company recently acquired a five-property, 602-room Marriott hotel portfolio in Austin, Texas, from an affiliate of RLJ Lodging Trust for $65 million as part of its larger growth strategy.
Jones Lang LaSalle Inc. represented the seller in the transaction and JRK Property Holdings was self-represented.
JRK Property Holdings used money from its $350 million Hospitality Fund for the purchase. It is the first multiproperty hotel deal in the company’s history.
JRK’s Hospitality Fund is the company’s seventh fund but its first dedicated to hotels.
The company is focusing its efforts on value-add investments in top markets from $25 million to $3 billion for portfolios.
Bobby Lee, president of JRK Property Holdings, said that in the last 25 years, hotel properties owned by the company have included the Oceana in Santa Monica, which Lee said the company was able to grow “pretty significantly.”
He added that while JRK Property Holdings has “bought and sold hotels over the years, we haven’t grown the hotel side of the business the way we have the apartment side of the business.”
The group has previously raised multifamily funds, and this hotel fund will allow the company to grow more in the hotel industry, he said.
“We think we’re entering the right cycle,” Lee said. “We’ve started to see that as we’re entering later years in this economic expansion, we’ve seen things slow down, and in the hotel world, we’ve seen revenue growth (nationally) slow to low single digits and flat.”
This makes it a good time to buy.
“You’re buying not at the peak, you’re buying with a little comfortable cushion against that. And because of that, you are starting to see some of the buyers and sellers getting a little more negative, and it’s gotten a little less crowded,” Lee said. “We can be much more opportunistic in our approach.”
Lee said JRK Property Holdings is looking for value-add assets where the company will put significant amounts of money into renovations.
For the Austin Marriott portfolio, JRK Property Holdings will revamp the lobbies and add higher-end food and beverage options.
“We’re going to be spending almost half of what we spent on the properties on renovations,” Lee said.
He added that the company bought in Austin because it is “relatively cheap” compared to the West Coast, has strong employment and job growth, and is expanding. Customers, he said, are willing to stay further outside of the downtown area, allowing the company to get higher returns from investing in properties just outside of the city core.
JRK Property Holdings still has around $900 million of buying power, which Lee said could amount to dozens of properties.
The company is interested in L.A., and in the event of an economic downturn, thinks there could be more opportunities.
“A lot of sellers find it attractive to work with a buyer that already has the money and doesn’t have to raise it and find capital,” he added.
Lee said JRK Property Holdings is especially interested in areas like Santa Monica where there isn’t as much new supply of hotel rooms compared with other markets in L.A.
