NANTUCKET, Massachusetts—Tom Grassle joined Scout Hotels eight months ago to help the small company build a bigger portfolio. That expansion is likely to kick into gear this year, Grassle, who filled the newly created position of VP of acquisitions and development, told the Hotel Investment Barometer during a telephone interview last week.
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| Tom Grassle, Scout Hotels |
Scout currently has a portfolio of three properties comprising 573 rooms. Grassle said the company aims to add one or two properties each year to the portfolio. It’s an easily reachable goal, he said.
Grassle took time to speak with the Barometer about the company’s future acquisition plans and the current state of the hotel lending environment.
Hotel Investment Barometer: What’s keeping Scout Hotels busiest these days? What are your goals for the year?
Tom Grassle: “Our plan for the year is consistent with last year in that we’re looking at assets in resort locations that perhaps are in need of a turnaround. We’re looking for 75 to 400 (rooms), but our sweet spot is 125 to 225 keys, and we like hotels that have a significant amount of meeting space because we think relying on leisure business leaves you open to (cyclical leisure business) and if you have meeting space you can go after group business as well. We’ll consider deals in urban locations, but, it’s tough. We focus on secondary and tertiary markets.”
HIB: How easy is it to transact when you’re going after luxury/resort properties? How would you characterize the deals market?
Grassle: “I think it’s picking up. I think that capital has been reluctant to look at resorts, particularly in tertiary locations, but I think that’s starting to change and I feel we’re in a good position to take advantage of it.”
HIB: What are the biggest challenges for you in getting deals done today?
Grassle: “For us being a small company, it’s the speed at which deals are transacting right now. … Sales transact quickly so there’s a strong appetite … There’s a lot of competition; that’s the biggest challenge.”
HIB: You mentioned earlier that capital was starting to come back into the market. How do you perceive the lending environment right now and how are lenders underwriting deals?
Grassle: “We’re operating under the same assumptions and reading the same publications everyone follows. For (secondary market) resort assets, interest rates are a bit higher than in urban markets, but certainly there’s debt available in the 65 to 70(%) LTV range. From our perspective … we’re focusing on leveraged returns in excess of 20%.”