Marty Collins

Gatehouse Capital CEO and President Marty Collins calls it a “Texas-centric strategy,” which is no surprise considering all the joint-venture partners are based in the Dallas area. GVM Hotel Partners — Varro Hospitality, Gatehouse and John Muse, the co-founder of HM Capital — acquired five TownPlace Suites By Marriott last week and the joint venture has close to $300 million more available to spend on financially distressed select-service and extended stay premium-branded hotels in the Lone Star State.

GVM paid $30 million ($52,539 per key) for the four Texas properties (two in Houston, one in Austin and College Station) and one in Birmingham, AL. The seller was Inland American Lodging Group, a subsidiary of Inland American Real Estate Trust.

“We’ve got a third of a billion dollars to invest in this strategy,” says Collins of the $100 million in equity available among the three partners, which could bring another $200 million in debt for further acquisitions. Gatehouse, Collins says, will play a strategic role, while Varro will provide the day-to-day and asset management of the growing portfolio. Muse is the single largest investor and Collins says his friend will be an active capital partner because of his financial acumen and experience.

TownPlace Suites by Marriott Houston Northwest

The focus for GVM will primarily be Texas and cities like Austin, Dallas, Houston, Fort Worth and San Antonio. “We like the dynamics here,” Collins says. “We like the growth story, the jobs story and where our economy is with migration and corporate relocation. It’s the Sun Belt, the middle of the country, near Mexico and we’ve got low taxes.”

Collins says they’ll keep the Birmingham property and won’t shy away from other out-of-state assets if they’re a part of a Texas package they target.

Why just the focus on select-service and extended stay, especially since Gatehouse has been a leading developer of luxury properties like Starwood’s W brand?

Jeremy Robinson

“That’s where we believe the most opportunity is,” says Jeremy Robinson, chief operating officer of Varro Hospitality. “We believe limited service and extended stay are typically below the radar of major REITs and too high (a price) for most private investors. We’re focusing on those core assets, from Hyatt, Hilton, Marriott and some IHG and Starwood brands.”

“You have to fish where the fish are,” Collins adds. “Right now, you can buy things at a significant discount to replacement cost and that makes a lot more sense than building at replacement cost with a foot of water over your head.”

The five TownPlace Suites were built between 1999 and 2001, and need little renovation work, say Collins and Robinson. After the acquisition was announced on Sept. 14, GVM contracted Texas Western Management to operate the properties.