Alleghany Capital Corporation’s majority acquisition of Concord Hospitality has provided Concord with long-term stability and deeper pockets to find new deals, said president and CEO Mark Laport.
ATLANTA—Having Alleghany Capital Corporation as it majority owner has opened new doors for Concord Hospitality Enterprises Company, according to Concord President and CEO Mark Laport.
“It’s been a supercharged enabler to do deals that maybe we wouldn’t have done,” Laport said during a break at the recent Hunter Hotel Conference. “Now we have a major investor to talk about deals with that is invested in the management side who wants to help it grow, so it has a financial incentive to thoughtfully invest in real estate, too, which provides us with more growth velocity.”
In October 2018, Alleghany Capital acquired a majority interest in Concord, which was founded in 1985 by Laport and manages more than 100 hotels comprising nearly 15,000 rooms and 5,000 employees. Laport said the deal gave Alleghany 85% ownership of Concord’s management business. Concord and Laport also own several dozen hotels through various partnerships and limited liability companies.
“It tells my partners, those who also own that real estate, bankers, investors, franchisors … all those that have a natural concern about longevity of the enterprise,” Laport said. “That definitely has a stabilizing affect.
“We’re now five months later, and it’s been spectacular,” he added. “You’re always worried what can happen when the 800-pound gorilla comes to town. The 800-pound gorilla found us as we were actually looking.”
Laport said he promised Concord’s leadership team that he would develop a succession plan and this was part of it.
“I had been looking for the last year and a half or two on a succession plan in a way that folks who work with me could feel good about their future,” Laport said. “A lot of transactions happen and everybody goes home, and I committed to them that I was not going to do that.”
Laport started talking to private-equity funds, but their mentality is to buy a great operating company and flip it out in three to five years, he said. He was looking for more a long-term situation.
“Then comes Alleghany, an insurance company that really has a vision like Warren Buffett to buy, hold and invest in the people and help the companies flourish and grow more because of their balance sheet,” Laport said. “Every sentence was about long term, so that really resonated. We found out that their culture is really like ours—it’s very much about the people and everything you do emphasizes it.”
Alleghany Corporation, the parent company of Alleghany Capital, is an investment holding company originally created by the railroad entrepreneurs Oris and Mantis Van Sweringen as a holding company for their railroad interests, according to its website.
“The fact that they have been around since 1929 with only four CEOs told me a lot about how they think,” Laport said.
That thinking includes letting Concord’s management team run the business quasi-independent of the investment firm, the CEO said.
“They said … ‘We want to meet with you four times a year, you tell us what’s going on, how you’re going to grow so everyone can be accountable,’” Laport said. “That gives me a chance to further stabilize our company for the long term as well as eventually—and I’m not planning to go home because I love what I do—find a replacement and what would be my successor.”
While Alleghany didn’t invest in the real estate side of the business, that could change sooner than later as it now has “tens of millions of dollars to invest in real estate,” according to Laport.
Active pipeline for Concord
Concord has 41 hotels in its development pipeline, including 12 under construction and 14 that will begin construction this year.
“We have a pipeline with over a billion dollars of hotels,” Laport said.
That pipeline includes 22 select-service hotels and four full-service properties with Marriott International.
The company also has pipeline projects with Hilton, Hyatt Hotels Corporation and Choice Hotels International, Laport said.
The relationship with Choice includes an agreement signed in January to develop 27 WoodSpring Suites properties through a Concord subsidiary called Chesco Purchase Company. The hotels will be built throughout Michigan and North Carolina, as well as in the metropolitan areas of Jacksonville, Florida, and Nashville, Tennessee, according to a Choice news release.
Historical approach has been successful
Laport said its new ownership and general approach position Concord well for the future, even if he has concerns about the state of the “amazingly long” cycle the industry has experienced.
“It’s already showing signs of slowing down for sure—some markets have been going backwards,” he said. “We’ll see the end of this up-cycle in the next couple of years. What I also believe is it should be a more soft landing than the cliff of ’09.
“We’re not overleveraged. We operate hotels for a lot of third-party people, and we’ve been careful to make sure those hotels that we don’t own are with partners that think conservatively, too,” he added. “If you’re not capitalized right and things go the wrong way, it causes a lot of stress.”
Concord’s position is strong in large part because of its historical approach to business development and now Alleghany’s backing, according to Laport.
“In good times or bad times, we believe as it’s been our history, that we will sign more contracts,” Laport said. “Even if revenues become flat … we’re committed to the deals we have and we’ll sign more contracts so Concord Hospitality as an enterprise can continue the upward growth even if the economy stalls.
“Our biggest growth spurt has been in down times. We’re able to take advantage of times when others don’t want to or can’t,” he added. “You can buy real estate for less, buy construction for less in those dips with the belief that times will get better. Being a private company with private equity, my belief over three-and-a-half decades (is we have) a longer horizon as opposed to public companies. I like that stability.”
Laport said finding talent is the biggest challenge for Concord.
“In our company we’re not satisfied with anything less than best-in-class talent and everyone is chasing them,” he said, adding that Concord in 2019 will hire about 500 associates. “We’re in some markets where it’s hard to even have people apply for jobs.
“It is harder than ever, so we have to work harder at it,” Laport said. “But I can quietly brag that we, through time and effort and doing the right things and being guarded about our reputation and zealous about our reputation, find ourselves in a spot where Concord is its own brand with integrity and known for treating its people right.”