In an interview with GHG Chairman Jim Butler, Mike talks about his thinking for acquisitions and asset management, and the importance of customer focus and "service profit chain."

Jim Butler: Well, Mike, congratulations on your new appointment at Lend Lease. We understand that hotel asset management and acquisitions are the core of your responsibilities. What's on your agenda?

Michael DeNicola: Thanks Jim. I am really excited to join Lend Lease and to return to Chicago. The Lodging & Leisure Group at Lend Lease has the best asset management and acquisitions people in the hotel real estate investment industry. We currently are looking at investments for our Value Enhancement Fund (VEF) series - Lend Lease's successful enhanced return commingled funds. Specifically, we are looking at full-service, upscale and luxury hotels which have upside potential in major and secondary markets. We are interested in resort, central business district and airport locations and have little interest in suburban or tertiary markets. In the past, Lend Lease acquired hotels that needed repositioning and major capital investment in order to achieve the investment return objectives. Right now we are finding opportunities on well-positioned hotels with major brands that do not require significant capital. We have looked at, and would consider, companies and portfolios, but currently most of the hotel activity has been one-off properties.

Jim Butler: You work within the giant Lend Lease real estate organization, which is headquartered in Australia. Will your charge include working on behalf of investors or more for Lend Lease's own account? Tell us about the special challenges that this presents. 

Michael DeNicola: Currently, we asset manage hotels for a number of Lend Lease's clients, including insurance companies, pension funds and commingled real estate investment funds such as VEF and YCP. Lend Lease typically invests in the commingled funds so that investors know that Lend Lease is aligned with their interests. As most of our funds are for institutional players, we have to be concerned about unauthorized business income and ERISA issues for the pension funds. This presents special challenges in structuring investments in hotels and particularly ancillary real estate opportunities in resort markets such as condominium sales and timeshare.

Jim Butler: You were credited with being a major contributor to the outstanding growth of Carlson Company, your former employer. Are there any similarities in approach or focus for Carlson and Lend Lease?

Michael DeNicola: Thanks, but I was just one of many that helped in the growth of Carlson Companies. Like Carlson, Lend Lease is very growth oriented. Just this past year, Lend Lease made three major acquisitions: Boston Financial, Bovis and most of AMRESCO. Like Carlson, Lend Lease could not grow successfully without being customer focused. Lend Lease is the leading investment manager in the world, yet is structured to provide each client with the individual attention and one-to-one service required to ensure their individual investment objectives are achieved. Since joining Lend Lease in February, we have been working to develop a business plan focused on growing the hotel assets under management and acquiring hotels for our VEF series of funds.

Jim Butler: Let's look at the asset management side for a bit. Tell us about your approach in this area.

Michael DeNicola: Lend Lease already has the best hotel asset management team in the industry led by Doris Parker-Grossman. Doris and I have worked together in the past and we have similar values and approaches to asset management. I think my experiences at Carlson and Radisson can help us better understand the issues facing operators and managers in the business today. I am a big proponent of the "service-profit chain" where employee satisfaction drives employee loyalty which drives customer satisfaction and customer loyalty. And customer loyalty drives long-term profitability and growth.

Jim Butler: What should hotel operators - and your own investors - know about having Mike DeNicola and your team keeping a vigilant eye on things?

Michael DeNicola: I think most people who know me, know that I am a straight shooter and seek to find "Win-Win" solutions. I have always felt that working together, operators, owners and employees can enhance the product and service package to consumers, leading to sustained growth and profitability. This growth creates opportunities so everyone wins. Although I tend to focus on revenues, I am a CPA so I know a little something about internal controls and flowing money to the bottom line as well!

Jim Butler: In an information and technology age, real estate ownership is often seen as "old economy"- and highly sensitive to interest rates and cyclical economic patterns. How does Lend Lease Hotel Group investments compete against other kinds of investment classes like growth or value stocks?

Michael DeNicola: Well, I think real estate plays a role in a well diversified portfolio effectively sitting between stocks and bonds on the risk/return profile. Our Lend Lease VEF series of funds look to invest in companies that are real estate technology - oriented. We are also looking at other investments in management and brands as well as in timeshare and private residence clubs. Our track record for our investors is extremely strong and we consistently are voted the top investment advisor by institutional investors in independent surveys.

Jim Butler: Look into your crystal ball for a moment. What are the challenges that portfolio owners face in the next 10-15 years and how will you as an asset manager help your investors successfully exit their investments?

Michael DeNicola: The trends in demographics and consumer activities point to an explosion in travel. At Lend Lease we will seek to keep ahead of these trends, investing in markets that will see higher than normal growth, enjoy high barriers to entry and are of a quality that limits the impact from economic downturns. By having people on our team that have experience beyond real estate and finance, including brands, sales and marketing, new distribution channels and operations, we can continue to produce and exceed the return expectations of our clients.