REPORT FROM THE U.S. AND CANADA—A new cross-border joint venture between Driftwood Hospitality Management and Pacrim Hospitality Services was formed to exploit hotel development and acquisition opportunities in both the United States and Canada.
Complementary skill sets and experience drew the two companies together, said Brian Quinn, executive VP of development for Driftwood, a Florida-based owner, developer and operator with 39 hotels in its portfolio.
“Quite a few Driftwood executives have development expertise, which Pacrim can benefit from, and conversely (Pacrim) has talent in every single market in Canada where you would want a hotel. They have market knowledge and know how to interact in those communities,” Quinn said.
The joint venture intends to deploy up to $100 million in capital within five years to buy and develop properties in both countries, as well as select global markets. The primary focus will be new development in Canada and property acquisitions in the U.S.
“We have a significant amount of equity contributed or committed already for our first seven or eight properties, which are mainly focused in eastern Canada,” said Glenn Squires, CEO of Nova Scotia-based Pacrim, which has 46 properties mostly in Canada in its portfolio. “We have partners on the ground for each of these projects, and in addition to ourselves, they will be contributing.”
Squires said new development will center on properties with between 100 and 300 rooms in both center-city and suburban locations with flags from major brand companies. Another opportunity is economy extended stay, a market Squires said “has barely been touched up here (in Canada).”
Initially, Newfoundland is a target for development because of the province’s oil and mineral industries, Squires said. He said the venture is also working with a group in British Columbia to develop between three and five hotels in that province.
“The focus, at least in the short term, will primarily be on Ontario and east,” he said. “Alberta and Saskatchewan are much like the Dakotas, with oil and gas (exploration). Construction costs are very expensive, so we would probably shy away from those markets in the short term.”
In the U.S.
Quinn said the JV will look for a variety of acquisition targets in the U.S., including some hotels under distress and “opportunities to renovate, rebrand and bring the management expertise of the combined companies to bear.”
“The markets are no surprise,” he said. “We won’t necessarily be hunting in the ‘A’ markets, or the major markets, because you have a lot of (real-estate-investment-trust) competition, which bids up the price. Probably not really tertiary markets either, but there are markets in the middle of which there are many that continue to heal and continue to have attractive transactions in. That’s been our target in the past and it will continue to be.”
For Pacrim, the alliance represents an efficient way to further penetrate the U.S. market. The company has one hotel each in New York, Florida and South Carolina.
“The Driftwood platform in the U.S. is very attractive to us,” Squires said. “We want to establish some scale down there, so it makes more sense to work with Driftwood as the manager rather than to duplicate my Canadian operations south of the border.”
Outside North America
The partnership is also looking to Central and South America, and the Middle East for deals. Driftwood has operated in the Bahamas before and now has three hotels in Costa Rica: a Holiday Inn in San Jose, a beach resort and a property in the rain forest.
Pacrim recently signed a deal to develop a 250-room InterContinental Hotel at a golf club in Muscat, Oman. Squires said the project is being done in conjunction with a Saudi Arabian company and a family from Oman.
“Like a number of countries in the Gulf area, Oman has decided to make tourism a key platform in its economic development,” Squires said. “But they’ve taken a different view than Dubai (United Arab Emirates) has with its super projects. We’ve been able to establish a relationship, and we think there is a lot of potential there.”
He said the JV will also be involved in a second hotel in Oman, an oceanfront resort near Muscat.