Services, Survived 2 Hurricanes, Lost their Corporate Offices
and Acquired 15 Hotels in 2005
|Gulfport, MS January 3, 2005 - It has been a very busy
year for Encore Enterprises and its management company, Pineapple Management
Services. On January 1, 2005 Encore Enterprises owned and operated 19 hotels
comprising 1,510 rooms in eight states. By December 31, 2005 Encore
Enterprises had teamed up with institutional partner, Five Arrows Realty,
Securities IV L.P., survived 2 Hurricanes, lost their Corporate Offices
and acquired 15 more hotels.
“Our 2005 goals were ambitious enough without the challenges brought on by the destruction of two Hurricanes and the loss of our Corporate Offices says Dr. Bharat Sangani, Chairman of Encore Enterprises. We spent almost two years searching for an Institutional Partner to help grow our company. We were very fortunate to have found as great a partner as Five Arrows Realty. Our business plan was simple; target and acquire Marriott, Hilton and Inter-Continental limited lodging hotels, invest the money necessary to bring them up to current Brand Standards and implement our own internal controls to improve financial performance. We had not anticipated Mother Nature would add her own complexities to our growth plan”.
By the end of the 1st quarter of 2005 Encore Enterprises had acquired a Fairfield Inn by Marriott at Savannah, Georgia Airport and a Fairfield Inn by Marriott and a full service Airport Radisson, both in Memphis, Tennessee. When the partnership with Five Arrows was finalized in July of 2005, this provided Encore Hospitality with the ability and opportunity to acquire almost 400 million dollars worth of hotels. “We spent numerous man-hours performing due diligence on a number of companies, before we selected Encore Enterprises, says Matt Kaplan, Managing Director for Five Arrows. We concluded they possessed all the ingredients of a good company: talented senior management, sophisticated infrastructure, proven track record and an appetite for growth. We understood this ambitious growth plan would be strenuous enough, then, less than thirty days after our partnership was formed, Hurricane Katrina struck. We were wondering how the company would survive let alone proceed with the acquisitions in the pipeline”.
As a result of both Hurricanes, Encore’s Corporate office was destroyed, 30 associates lost everything and the technology equipment which the company relied heavily on to run the company, was barely operable. The Hurricane(s) had damaged nine hotels in Texas, Louisiana and Mississippi. The immediate objectives were to restore communications between the hotels and the corporate office, care for the associates and their families, assess the physical damage to the company and effect emergency repairs.
“The management team, corporate office staff and the hotel general managers and their staff performed above and beyond our expectations. Hotels remained open, hotel guests received daily service, and we retained over 95% of our corporate office staff and honored all of our contractual purchase agreements before year end”, said Pat Barber CEO for Encore Enterprises. “Many companies in Louisiana and Mississippi simply shut down their operations: we chose differently. There are not many companies who could have done what we went through and still managed to close on over 120 million dollars worth of acquisitions within 100 days after the Hurricanes”.
The acquisitions completed in the month of December include nine Hampton Inns, a Homewood Suites by Hilton, a Courtyard by Marriott and a Residence Inn by Marriott. Jones Lang LaSalle Hotels Select Service Division announced they advised Mercury Investment in the disposition of a portfolio of nine Hampton Inn Hotels in the month of December. The hotels were sold to Encore Enterprises for $100 million. Located in various markets across the country, the properties comprised 1,238 rooms, which included the following assets:
Property Location Rooms“We are very pleased with the nine-property Mercury Hampton Inn portfolio sale. This transaction represents the very essence of Select Service hotel real estate today where brand, box and locale are the core value creation factors. These were very desirable assets in the Hampton Inn system and five of the nine were non-replaceable. This represents a large transaction for the purchaser, Encore Enterprises of Gulfport, Mississippi, and a timely disposition for the seller,” said Keith Thompson, one of three managing directors for Jones Lang LaSalle Hotels’ Select Service Division. “Although the average sales price per room was $81,000 on the portfolio as a whole, the per property allocation represented below replacement cost for several of the properties while exceeding replacement cost for the non-replaceable assets. The purchaser anticipates strong accretive value through per-property focused management and increased sales through their unique marketing abilities.”
So how does a company acquire 1,933 rooms in seven states with combined revenues in excess of 45 million dollars; all in one week?
“First we selected and trained a team of corporate office staff and experienced General Managers. We then sent them to the newly acquired hotels to be present on the day of turnover. A luncheon with the new associates was held while benefits and polices and procedures were explained. After the Holidays these same experienced General Managers returned to the hotels to begin the first week of a three week training program designed to orientate the new General Managers with company culture, polices and procedures, budgets and corporate office staff”: explained Glenn Pedersen, President of Pineapple Management Services.
Work has already begun on the repairs brought on by the two Hurricanes. Over the next 6-12 months Encore Enterprises will spend approximately 12 million dollars on property renovations for the newly acquired hotels. Once these renovations are completed all hotels will meet the Brand standards required by their respective Franchisor. Already one of Marriott’s largest Franchisees, the recent acquisitions will elevate Encore Enterprises to the 13th largest Hampton Inn Franchisee, one of the top 50 Management Companies and one of the top 100 Hotel Ownership companies in the United States. The portfolio contains 35 hotels with 3,443 rooms in 13 states and generates over 75 million dollars a year in revenue. In spite of this, there is more work to be done. Encore Enterprises is still actively searching for acquisitions. “Our intention is to selectively acquire an additional 200 million dollars worth of hotels over the next 12 months says Pat Barber. Our business model is primarily focused on limited lodging opportunities but we will contemplate full service hotels where the right opportunity and synergy exist within markets we already manage hotels”.
|Also See:||Encore Hospitality, LLC, a Mississippi Developer of Limited-service Hotels, Obtains $85 million in Funding for Growth / June 2005|
|Encore Enterprises Acquires Four Marriots Properties for $18M; Pineapple Management Services Assigned Management Contracts / February 2004|