Lodging Magazine May 2017 : Page 15

FRONT DESK NEWS, IDEAS, AND INSIGHTS SUCCESS STORY Focusing on a Niche MAKI NAKAMURA BARA’S EYE FOR “DIAMONDS IN THE ROUGH” GIVES CHARTRES LODGING GROUP AN EDGE WHEN REDEVELOPING AND REPOSITIONING PROPERTIES BY ELLEN MEYER››››››››››››››››››››››››› tial real estate developer, Maki Nakamura Bara likes to describe the “aha moment” when she decided to focus on the hotel industry: “I was a 22-year-old general analyst at a real estate investment fi rm with a small hotel division. I was fi rst sent to Fort Worth to see an o ce building, which was fi ne, but then, the next week, I was sent on my own to the Westin Maui, and that was it for me!” Now, Bara has two titles. First, as president and co-founder of The Chartres Lodging Group, LLC, she is a leading expert in redeveloping and repositioning urban hotels, resorts, conven-tion hotels, and confer-“We didn’t want to just ence centers. She is also of Kokua ride the market; we co-chairman Hospitality, a manage-wanted to make sure ment company based in Francisco. an asset had enough San Bara says after internal growth that we gaining experience in various positions over could change something the years, in 2002, she and turn it around.” and now-partner and Chartres CEO Robert M AKI N AKAMURA B ARA , Kline—who had been her PRESIDENT AND CO -FOUNDER OF fi rst boss, mentor, and T HE C HARTRES L ODGING G ROUP AND colleague—decided to CO -CHAIRMAN OF K OKUA H OSPITALITY start their own company. “We had worked together at three di erent companies but were basically doing the same thing—buying hotels, managing the assets, and adding value. In 2002, we decided, ‘Let’s do this on our own’.” THE DAUGHTER OF AN ARCHITECT -turned-residen-SMART MOVES Bara has built her While they briefl y considered invest-career on buying, ing in a small property themselves, she renovating, and says, “We decided to stick to what we repositioning under-knew,” pursuing large institutional-qual-valued and under-performing assets. ity assets and purchasing them with capital partners with whom they had relationships. Their fi rst hotel purchase was of the Pan Pacifi c—now the JW Marriott in Union Square in San Francisco—with Goldman Sachs. Next, after they had expanded their business to Japan, was a joint venture with Goldman Sachs to purchase fi ve hotels in a portfolio from a chain company in Japan. “It was really the fi rst time non-recourse debt was available in Japan, the fi rst time an outright equity purchase was being done and not through an NPL portfolio,” Bara explains. “We were also very fortunate to be at the right place at the right time then.” However, she says, “We didn’t want to just ride the market; we wanted to make sure an asset had enough internal growth that we could change something and turn it around.” MAY 2017 LODGINGMAGAZINE.COM Maki Nakamura 15

Success Story

Ellen Meyer

Focusing on a Niche

MAKI NAKAMURA BARA’S EYE FOR “DIAMONDS IN THE ROUGH” GIVES CHARTRES LODGING GROUP AN EDGE WHEN REDEVELOPING AND REPOSITIONING PROPERTIES

THE DAUGHTER OF AN ARCHITECT-turned-residential real estate developer, Maki Nakamura Bara likes to describe the “aha moment” when she decided to focus on the hotel industry: “I was a 22-year-old general analyst at a real estate investment firm with a small hotel division. I was first sent to Fort Worth to see an office building, which was fine, but then, the next week, I was sent on my own to the Westin Maui, and that was it for me!”

Now, Bara has two titles. First, as president and co-founder of The Chartres Lodging Group, LLC, she is a leading expert in redeveloping and repositioning urban hotels, resorts, convention hotels, and conference centers. She is also co-chairman of Kokua Hospitality, a management company based in San Francisco.

Bara says after gaining experience in various positions over the years, in 2002, she and now-partner and Chartres CEO Robert Kline—who had been her first boss, mentor, and colleague—decided to start their own company. “We had worked together at three different companies but were basically doing the same thing—buying hotels, managing the assets, and adding value. In 2002, we decided, ‘Let’s do this on our own’.”

While they briefly considered investing in a small property themselves, she says, “We decided to stick to what we knew,” pursuing large institutional-quality assets and purchasing them with capital partners with whom they had relationships.

Their first hotel purchase was of the Pan Pacific—now the JW Marriott in Union Square in San Francisco—with Goldman Sachs. Next, after they had expanded their business to Japan, was a joint venture with Goldman Sachs to purchase five hotels in a portfolio from a chain company in Japan. “It was really the first time non-recourse debt was available in Japan, the first time an outright equity purchase was being done and not through an NPL portfolio,” Bara explains. “We were also very fortunate to be at the right place at the right time then.”

However, she says, “We didn’t want to just ride the market; we wanted to make sure an asset had enough internal growth that we could change something and turn it around.” Describing the niche she and Kline now occupy, she says, “I think our passion and our expertise is really in that valued-added space. We look for a property in a great market or location that is broken— especially a complex asset where we can be competitive. This strategy has proven successful for us, as our realized IRR since 2002 is 65 percent.”

She specifies the three things they consider in order to add value: operations, physical look of the property, and brand. And, because they are mindful of their eventual exit—presumably via sale to an institutional buyer—she says, it’s best that the property be under their radar. “We can go in and fix all of these things and make it attractive for an institutional buyer who would have never considered it previously.”

Her favorite example is The Hyatt Place in Waikiki. “It was a dated two-star property and it needed a lot of capital love. We saw it as a diamond in the rough.” Chartres spent more on the renovation than the purchase price. “There were a lot of problems—structural, environmental, mechanical—so we really redeveloped it as opposed to just renovating it.” They also managed to keep it open throughout the renovation process. “We did one tower at a time and had temporary lobbies set up. It’s important to maintain a hotel’s business during major renovation such as this one because of negative cash flow, debt needs.”

Knowing there was a void in a market that consisted mainly of luxury beachfront hotels and tour travel hotels off beach, the partners believed the newly overhauled property would appeal to both the east- and west-bound traveler. “This property really wanted to be special again and it was. In the end, we ended up executing an exit much sooner than we had anticipated.”

Bara says she still considers it “more fun and sexy to handle hotels than office buildings,” but for different reasons. “Just as my father loved creating a living space to make a family happy, from a personal perspective, I enjoy doing the same thing—creating an enjoyable living space—during their stay in a hotel, whether it’s for one night or one week. From the business perspective, I find this industry exciting and dynamic; it allows us to use our creativity more than if we had fewer touch points.”

ECONOMIC INSIGHTS

At the Hunter Hotel Investment Conference, hotel executives talked about the factors that impact the U.S. travel industry. Here are their thoughts:

“Travel is, I think from a global perspective, something like 10 percent of the world’s exports. We in the U.S. obviously want our fair share of [global travelers]. We have to make sure that we always have a welcome mat out front.”

LIAM BROWN
President, Franchising, Owner Services, and MxM Select Brands, North America, Marriott International

“What I [have] found is that the markets differ greatly. We can’t lump all of the U.S. together and say, ‘Oh, it’s behaving this way or that way.’”

DAVID KONG
CEO, Best Western

“When people are feeling good about themselves, when people are feeling good about the economy, good about their future, they tend to be more willing to spend money and more willing to make investments… I am hoping that starts to carry through.”

ROBERT SARVER
CEO, Western Alliance Bank

GOOD ADVICE

MAKI NAKAMURA BARA, PRESIDENT AND CO-FOUNDER OF CHARTRES LODGING GROUP AND CO-CHAIRMAN OF KOKUA HOSPITALITY, HAS THIS ADVICE FOR HOTEL DEVELOPERS.

1 KNOW WHAT YOU ARE GOOD AT. “Rob and I knew the institutional-quality space and decided to stick to what we knew. We’ve learned that our passion and our expertise is now in the value-added space of branding, operations, and the physical space.”

2 KNOW WHAT YOU CANNOT CHANGE. “You can’t change the market or location a property occupies, so we look for things that have those two things covered. Basically, we focus on a property that is broken in a great market or location, because we want to be able to add value there. Every deal that we’ve had has had a renovation.”

3 DON’T LOOK BACK. “Some of the best deals we have ever done are deals that we walked away from. We never think about that, or talk about that, but we do have to remain disciplined.”

4 DON’T BET ON THE MARKET. “We are not smart enough to time the market. The market will eventually come back, even if we can’t tell you when. Our job is to create value for these assets regardless of the market lift. The market had to just be a bonus.”

Read the full article at http://bluetoad.com/article/Success+Story/2789295/409404/article.html.

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