Celebrating its 25th anniversary this year, The Buccini/Pollin Group has seen success with premium-branded, full-service hotels like the first Embassy Suites and Homewood Suites hotels in New York City, and the forthcoming Virgin Hotels Nashville.
WASHINGTON—The leadership executives at The Buccini/Pollin Group don’t necessarily want to do what everyone else is doing when it comes to hotel real estate.
That’s why the company, which celebrates its 25th anniversary this year, is laser-focused on very specific types of hotel deals. For BPG, that means full-service, usually premium-branded, stabilized hotels.
“We identified in 2014 there was a bit of a mismatch out there we could exploit—stabilized hotels in secondary markets that weren’t getting a lot of attention coming into the market,” said David Pollin, Buccini/Pollin Group co-founder and co-president. “Our first acquisition in that space was the Hilton Knoxville. This is not a heavy-lift, value-add strategy. We don’t have to compete with REITs or offshore capital. We’ve been very successful with that strategy.
“We can go in at a high 8% or 9% cap rate, and interest rates—at least until recently—were really low, and that was compelling,” Pollin added. “We kept doing it, and we’ll continue doing it.”
That strategy of building and acquiring premium, full-service branded hotels in primary and secondary markets sets BPG apart, Pollin said, because those hotels can deliver “something new and different.”
“There’s a lot to be said for premium-branded, select-service hotels, and there’s a strong institutional ownership base that would like to acquire them,” Pollin said. “But … if that’s what everyone else is doing, we should be looking deeper. If there’s a market with three really nice select-service hotels, then no one else is going to build a full-service hotel in that location. We feel our efforts are better spent creating something unique than building another select-service hotel, even if it is nice.”
So far this year, BPG acquired the 238-room Hilton Melbourne Rialto Place in Melbourne, Florida. That hotel, like most in the company’s owned portfolio, is managed by its management company, PM Hotel Group.
“Because we’re affiliated with PM, we have real expertise in stewarding these sometimes-older boxes,” Pollin said. “We have a construction group (BPGS Construction), too, so we can get really deep. Owning hotels like this can be scary for some groups, but we usually have a 10-year hold, a 10-year investment strategy. As long as we sell the hotel for what we paid—and hopefully more—then we’re in good shape.”
‘Bigger and harder’ projects
Also this year, BPG completed construction on the 310-room Embassy Suites Midtown Manhattan, which opened in mid-January. This is the first and only Embassy Suites in New York City and exemplifies the company’s strategy to do “bigger and harder” projects in gateway markets.
The Embassy Suites Midtown Manhattan joins the company’s other NYC project, the first Homewood Suites by Hilton in the city, which opened in 2014.
“We’ll take on these challenging projects, where a brand in an urban environment looks really different,” Pollin said. “It’s a lot more work, a lot more risk and it’s very capital-intensive. That’s what works for us.”
In the case of the Homewood Suites New York/Midtown Manhattan Times Square-South, Pollin said the company had been working for years to break into the New York City market. When the real estate came up, BPG entered a joint venture with Albanese Development Corporation and Rockwood Capital on the project, what Pollin called “the first truly urban new-build prototype.”
For the Embassy Suites, Pollin said the exercise was similar and even more complicated.
“When we identified the opportunity to do another hotel in New York City, we immediately thought of Embassy Suites,” he said. Challenges came up, however, given New York City’s light-and-air requirements for construction, as well as Embassy Suites’ suite prototypes.
“In New York City, you can’t have a sleeper sofa without access to a window, for example,” Pollin said. “So this 40-story hotel has a unique suite layout where the main room has a window, and then a high-back sofa lends some privacy for the other bed in the room, and they’re not right next to each other.”
The highly anticipated Virgin Hotels Nashville in Nashville’s Music Row broke ground last September, and Pollin said it’s another example of BPG’s goals to stand out in markets that might already be crowded with lots of similar players.
“There’s great opportunity in luxury lifestyle,” Pollin said. “We feel it’s the least disruptable of the hotel classes. Whether it’s Nashville or even a market like San Francisco, it’s unlikely there will be, say, five Virgin Hotels there.”
Excavation is complete on the Nashville Virgin, with opening slated for 2019. Twenty-five thousand feet of function space, an intimate performance space and “some of the most compelling F&B spaces” characterize the hotel, which Pollin called “spectacular.”
Celebrating 25 years
The company celebrates its 25th anniversary this year, and activity isn’t slowing down. At press time, the company has 24 hotels, comprising 5,197 guestrooms, in its owned portfolio.
This month, the company will open a new-build Canopy by Hilton in Bethesda, Maryland, just north of Washington, D.C., in the city’s Pike & Rose development. BPG will open another new-build Canopy in Portland, Oregon’s Pearl District in May.
Three full-service Marriotts are in the works as well, Pollin said. The company broke ground on a new-build in downtown Washington, D.C., has one in the works in Wilmington, Delaware (where it also is breaking ground on a new-build Homewood Suites), and a third that it’s not quite ready to share details about.
“We’re really excited about where Marriott is taking its core brand,” he said. “The brand may have stayed a little too focused, but now where their modern design is taking the brand, and its new approach to F&B—it’s really resonating with customers,” he said.
In addition to the Virgin groundbreaking, the company also had plenty of achievements in 2017, Pollin said, including:
- acquiring the 238-room DoubleTree by Hilton in Wilmington, Delaware;
- acquiring the 217-room Hotel DuPont in Wilmington, Delaware;
- acquiring the 302-room Sheraton DFW Airport in Irving, Texas; and
- completing more than $30 million in renovations, upgrades and repositioning of hotels.
As for the next 25 years and beyond, Pollin said the company “will continue to be agile.”
“We want to invest at every point in the cycle,” he said. “Being private gives us an advantage. We’ll continue most likely in our current format, but I do see us continuing to think about opportunities internationally. Today, we find there’s still great investment opportunities.”