CrowdStreet’s Darren Powderly is joined by Dave Pollin, co-founder and president of The Buccini/Pollin Group, to discuss how his hospitality portfolio is performing, what he hopes to see in Q4, and how his firm plans to build trust and confidence among travelers.
Darren Powderly, Co-Founder & VP Capital Markets
CrowdStreet
CrowdStreet
Darren founded CrowdStreet in 2012 after identifying the need to radically improve people's access to commercial real estate investments via technology. Over his 20+ year career, Darren has transacted billions of dollars’ worth of commercial real estate investments and enterprise software contracts. Darren is a driven leader who loves building relationships based on mutual success. In addition to building businesses, leading teams and advising a prestigious list of national clients, Darren has personally owned commercial real estate, syndicated investment groups and developed properties from the ground up.
00:00:05 Hey everybody. I'm Darren Powdery with CrowdStreet. Thank you for joining for this edition of StreetBeats. It's our short video series to keep you informed of what's going on in today's environment. We're speaking with, uh, investors and sponsors and capital markets advisors throughout the nation to share their insight. Today I'm here with one of our sponsors, Dave Pollin, president of the Buccini/Pollin Group, located in Washington, dc. We thought it'd be helpful to hear from Dave about what he's experiencing in his, uh, projects across the country and, uh, how he's evaluating this situation on a go forward basis. So, Dave, welcome to StreetBeats. Thanks for joining us, and, uh, please introduce yourself and tell us just a little bit about your experience here with CrowdStreet.
00:00:49 Hey, thanks Darren. We hope everyone at CrowdStreet and your families are safe and healthy. So we're based in Washington dc We are the hotel development and acquisition and operations arm of the BUC polling group. We operate 60 hotels nationwide, mostly full service like Marriott and Hilton. Um, we have about 3,300 associates and we're feeling really fortunate right now that, um, we did have a handful that tested positive for Covid, but they fully recovered and no one in quarantine or in the hospital right now.
00:01:17 Well, that's good. Yeah, that's always first and foremost in today's conversations is, uh, the health and wellness of our teams and our family members, of course. So. Well that's good. So Dave, the, the numbers are in and, uh, we've been speaking with other sponsors, uh, all of our sponsors kind of over communicating is the theme right now. Uh, what are the early numbers telling you about the portfolio? What have you observed to date about your portfolio, which is an impressive, uh, portfolio within the hospitality industry?
00:01:46 Yeah, thanks. Of the hotels that remain open, 55 of the 60, we're running about 15% occupancy that's consisting primarily of government. I think National Guard, uh, medical related work and some airline pilots who maybe aren't flying but might be training. There's other little DOPs of business there, but not much happening other than those three main groups. So we're at the bottom. We believe this year we anticipate the entire US marketing down between 40 and 50% and smart people that we talk to every day. And the analysts who are looking at the TE hotel industry think that we'll see between 50 and 60% RevPAR growth, which is revenue per available room in 2021. So that would indicate a relatively fast recovery for our industry.
00:02:32 Well, that's encouraging to hear and I hope that, uh, those, you know, positive, uh, projections in terms of a bounce back are absolutely true. I know it's hard to predict right now. We're just, you know, in the middle of, of this. But, uh, how has the situation with Covid today impacted sort of the 2020 pipeline or, you know, your forecast for your own business in terms of new business generation?
00:02:54 You bet. Just briefly. I think that the recovery is gonna come based on testing. We know that vaccines and cures are in the laboratory. We're hopeful they'll happen in the near term. But to us the question is, and Darren I'll ask you, when will you be comfortable sitting in a middle seat for a two or three hour flight? And the answer to that question will help lead us to when corporate travel begins to resume. So we anticipate a relatively busy fourth quarter. Um, and we feel like as we get ready to restart our business at scale, cuz we're at skeleton crew level now as you'd imagine mm-hmm. <affirmative>, we're thinking about things like of course communist. How do we communicate that to you as you're booking travel? When you check in, when you're on property, will you want a housekeeper to come in your room when you're dining with us? Will you want contact us delivery or will you want a traditional meal service? So we'll be ready for everything, but we have to have new plants in place and we're ready to roll those out as soon as that testing paradigm comes into focus.
00:03:49 Yeah, I think you're absolutely right. And we heard just yesterday with the president and uh, a lot of business leaders around the nation and, uh, you know, that testing couldn't come soon enough. And I, and that is my answer. And I think that, you know, given my age group and my exposure profile and the fact that I do travel often for business, uh, I, I will be probably one of the first people to get back on an airplane and to stay at a hotel. And I, I, uh, I look forward to having, you know, the safety, you know, and, and testing and uh, you know, treatments, uh, hopefully, uh, also in place at that point. But I, I know it'll be a new world for a business traveler, uh, which, you know, make up a lot of the hotel guests that, that you entertain and that, uh, make up the business. So, so, uh, so the hospitality industry, everyone's looking at it, uh, you know, thinking that it, uh, knowing that it has been disrupted, you seem pretty optimistic. And so tell us a little bit more about how you continue to work through, you know, this current phase and uh, and look to the future.
00:04:46 Yeah, I'd mentioned a couple quick things about the investment environment. When we have a hotel under contract, we're spending a lot of time with the seller and there's likely gonna be a new price associated with that transaction. The world's different than when people signed contracts. I think a lot of sellers appreciate that and they're showing some flexibility, especially if their strategic objective includes getting rid of that hotel for their portfolio for beneficial. Um, the second thing is we're seeing construction costs really come down quickly. For example, we're bidding a project now steels down from 2,700 a ton to 2100 a ton, and that means that other materials are likely to cost less. Think about oil costs, those directly impact things like concrete. So we're thinking about when does development come into focus? It's not today, but that day is gonna come and we wanna be ready for that with development projects. That makes sense. Um, and then finally we are starting to see some loan sales. We're thinking about the hospitality industry. Of course it may happen in other asset classes, but there are some banks and debt funds who are saying, let's focus on liquidity right now and we'll sell these hotel loans for a discount. And that gives people like us with capital markets ability as well as operational capability to see some pretty interesting opportunities.
00:06:02 Oh, I couldn't agree with you more. You know, I mean obviously you get through the health and wellness of our team members and our family part of the conversation you get through the aspect of like, this is what, how the, uh, covid disruption is impacting my existing portfolio. And then you start to think about the future and, and you can't think about the future as a real estate investor today without thinking about, you know, uh, you know, there will be disruption and distress in the market. So any part in comments, Dave, on uh, what the impact of covid is or the rest of 2020? The upside, uh, some silver linings. Uh,
00:06:36 I'd say on the hotel side we look at this as a brush fire and there have been a lot of, uh, shadow inventory coming to the market lately, whether it's Airbnb or people that rent apartment buildings. So we're seeing a lot of those guys in distress don't know where that's gonna lead, but I think the market will be different. And this may be we're moving some of that inventory from the combinations market, which we think would be healthy for hotels. Um, the second silver lining that I would really focus on is there's an amazing tailwind for travel long term, especially hotels. Chinese international outbound in 2008 was about 46 million. In 2018, it was 162 million. Wow. And that's country disrupted now. But you think also about boomers, the wealthiest generation in history, travel for them is a birthright. And then thinking about millennials, they want experiences. They don't want to own stuff. So all of that leads us to believe that the hotel industry is a great place to invest for the long term.
00:07:31 Yeah, I completely agree with you. Well Dave, thanks for joining us and uh, thank you all for tuning in to StreetBeats. Uh, be sure to register if you would like to receive this on a regular basis. There's a sign up on the bottom right hand corner of your screen. And, uh, with that, we thank you and we'll see you again soon. Thank you Dave.
00:07:48 Thanks.
00:00:49 Hey, thanks Darren. We hope everyone at CrowdStreet and your families are safe and healthy. So we're based in Washington dc We are the hotel development and acquisition and operations arm of the BUC polling group. We operate 60 hotels nationwide, mostly full service like Marriott and Hilton. Um, we have about 3,300 associates and we're feeling really fortunate right now that, um, we did have a handful that tested positive for Covid, but they fully recovered and no one in quarantine or in the hospital right now.
00:01:17 Well, that's good. Yeah, that's always first and foremost in today's conversations is, uh, the health and wellness of our teams and our family members, of course. So. Well that's good. So Dave, the, the numbers are in and, uh, we've been speaking with other sponsors, uh, all of our sponsors kind of over communicating is the theme right now. Uh, what are the early numbers telling you about the portfolio? What have you observed to date about your portfolio, which is an impressive, uh, portfolio within the hospitality industry?
00:01:46 Yeah, thanks. Of the hotels that remain open, 55 of the 60, we're running about 15% occupancy that's consisting primarily of government. I think National Guard, uh, medical related work and some airline pilots who maybe aren't flying but might be training. There's other little DOPs of business there, but not much happening other than those three main groups. So we're at the bottom. We believe this year we anticipate the entire US marketing down between 40 and 50% and smart people that we talk to every day. And the analysts who are looking at the TE hotel industry think that we'll see between 50 and 60% RevPAR growth, which is revenue per available room in 2021. So that would indicate a relatively fast recovery for our industry.
00:02:32 Well, that's encouraging to hear and I hope that, uh, those, you know, positive, uh, projections in terms of a bounce back are absolutely true. I know it's hard to predict right now. We're just, you know, in the middle of, of this. But, uh, how has the situation with Covid today impacted sort of the 2020 pipeline or, you know, your forecast for your own business in terms of new business generation?
00:02:54 You bet. Just briefly. I think that the recovery is gonna come based on testing. We know that vaccines and cures are in the laboratory. We're hopeful they'll happen in the near term. But to us the question is, and Darren I'll ask you, when will you be comfortable sitting in a middle seat for a two or three hour flight? And the answer to that question will help lead us to when corporate travel begins to resume. So we anticipate a relatively busy fourth quarter. Um, and we feel like as we get ready to restart our business at scale, cuz we're at skeleton crew level now as you'd imagine mm-hmm. <affirmative>, we're thinking about things like of course communist. How do we communicate that to you as you're booking travel? When you check in, when you're on property, will you want a housekeeper to come in your room when you're dining with us? Will you want contact us delivery or will you want a traditional meal service? So we'll be ready for everything, but we have to have new plants in place and we're ready to roll those out as soon as that testing paradigm comes into focus.
00:03:49 Yeah, I think you're absolutely right. And we heard just yesterday with the president and uh, a lot of business leaders around the nation and, uh, you know, that testing couldn't come soon enough. And I, and that is my answer. And I think that, you know, given my age group and my exposure profile and the fact that I do travel often for business, uh, I, I will be probably one of the first people to get back on an airplane and to stay at a hotel. And I, I, uh, I look forward to having, you know, the safety, you know, and, and testing and uh, you know, treatments, uh, hopefully, uh, also in place at that point. But I, I know it'll be a new world for a business traveler, uh, which, you know, make up a lot of the hotel guests that, that you entertain and that, uh, make up the business. So, so, uh, so the hospitality industry, everyone's looking at it, uh, you know, thinking that it, uh, knowing that it has been disrupted, you seem pretty optimistic. And so tell us a little bit more about how you continue to work through, you know, this current phase and uh, and look to the future.
00:04:46 Yeah, I'd mentioned a couple quick things about the investment environment. When we have a hotel under contract, we're spending a lot of time with the seller and there's likely gonna be a new price associated with that transaction. The world's different than when people signed contracts. I think a lot of sellers appreciate that and they're showing some flexibility, especially if their strategic objective includes getting rid of that hotel for their portfolio for beneficial. Um, the second thing is we're seeing construction costs really come down quickly. For example, we're bidding a project now steels down from 2,700 a ton to 2100 a ton, and that means that other materials are likely to cost less. Think about oil costs, those directly impact things like concrete. So we're thinking about when does development come into focus? It's not today, but that day is gonna come and we wanna be ready for that with development projects. That makes sense. Um, and then finally we are starting to see some loan sales. We're thinking about the hospitality industry. Of course it may happen in other asset classes, but there are some banks and debt funds who are saying, let's focus on liquidity right now and we'll sell these hotel loans for a discount. And that gives people like us with capital markets ability as well as operational capability to see some pretty interesting opportunities.
00:06:02 Oh, I couldn't agree with you more. You know, I mean obviously you get through the health and wellness of our team members and our family part of the conversation you get through the aspect of like, this is what, how the, uh, covid disruption is impacting my existing portfolio. And then you start to think about the future and, and you can't think about the future as a real estate investor today without thinking about, you know, uh, you know, there will be disruption and distress in the market. So any part in comments, Dave, on uh, what the impact of covid is or the rest of 2020? The upside, uh, some silver linings. Uh,
00:06:36 I'd say on the hotel side we look at this as a brush fire and there have been a lot of, uh, shadow inventory coming to the market lately, whether it's Airbnb or people that rent apartment buildings. So we're seeing a lot of those guys in distress don't know where that's gonna lead, but I think the market will be different. And this may be we're moving some of that inventory from the combinations market, which we think would be healthy for hotels. Um, the second silver lining that I would really focus on is there's an amazing tailwind for travel long term, especially hotels. Chinese international outbound in 2008 was about 46 million. In 2018, it was 162 million. Wow. And that's country disrupted now. But you think also about boomers, the wealthiest generation in history, travel for them is a birthright. And then thinking about millennials, they want experiences. They don't want to own stuff. So all of that leads us to believe that the hotel industry is a great place to invest for the long term.
00:07:31 Yeah, I completely agree with you. Well Dave, thanks for joining us and uh, thank you all for tuning in to StreetBeats. Uh, be sure to register if you would like to receive this on a regular basis. There's a sign up on the bottom right hand corner of your screen. And, uh, with that, we thank you and we'll see you again soon. Thank you Dave.
00:07:48 Thanks.