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Loews eyes portfolios, singles to fuel growth
January 24 2013

Loews Hotels is searching for portfolios and single assets to reach its goal of 50 hotels within three years.

  • The New York-based company hopes to more than double its portfolio within three years.
  • Loews is able to complete all-cash deals then bring in partners after the transaction is closed.
  • International expansion is also on the table as Loews eyes Europe for additional hotels.

LOS ANGELES—Acquiring hotel portfolios and single assets as well as constructing new hotels and expanding beyond the U.S. are instrumental for Loews Hotels & Resorts to reach the 50-hotel mark during the next three years.

With a series of recent acquisitions bringing its roster to 21 hotels, the company is poised to make the leap to more than double the size of its portfolio in relatively quick fashion, according to Troy Furbay, chief investment officer.

During a break at the Americas Lodging Investment Summit, Furbay said the hotel brand will continue to aggressively use parent company Loews Corporation’s balance sheet to maintain its acquisition mode.

“We’re likely to grow five hotels a year, which won’t get us to the goal of 50 that we want to have in three years, so along the way there will be a company acquisition or portfolio acquisition to get us up to scale that way,” Furbay said. “The right size (of portfolio) for us would be to buy 10, a dozen or 15 hotels in one deal. Buying a portfolio of properties requires the same work and fundamentals as buying one, so it’s a reasonable way for us to grow quickly.”

Furbay, who stressed that any portfolio would have to be entirely unencumbered by brand affiliation, declined to say how much capital the hotel chain has access to for acquisitions, but he said typical deals could be all-cash transactions.

The company in early 2012 acquired the former Renaissance Hotel in Hollywood in an all-cash deal and recently brought in Metropolitan Life Insurance Company as a partner.

“Going forward, we’ll do more like that,” Furbay said. “We can use balance sheet capital (to acquire) and bring in partners after the fact.”

Loews announced earlier this year a deal to acquire the 356-room Madison Hotel in Washington, D.C., and is in the process of buying the 225-room Back Bay Hotel in Boston. Both were all-cash deals.

“We’re buying Boston and Washington on our own account but don't always plan to be a 100% owner,” Furbay said. “Going forward, we see ourselves as 25% owner in a partnership. We’re fortunate to have a sizable parent company with a strong balance sheet and cash position.”

Loews is developing a hotel in Chicago. Once proposed as a site for a Waldorf-Astoria property, the location of the Chicago property is a billboard type of location in the Streeterville section of the Windy City, Furbay said. The 400-room Loews Chicago Hotel is expected to open during the first quarter of 2015.

“We spent a long time in the Chicago market trying to find an acquisition opportunity,” Furbay said. “We didn't find anything we liked until we got this.”

Also under construction is the 1,800-room Cabana Bay Beach Hotel in Orlando, Florida. When it opens next year, it will be Loews’ fourth resort at Universal Orlando and gives the brand 5,000 rooms in the market.

Loews has its eyes on other markets as well.

Top priorities for further expansion include San Francisco, Hawaii, Denver and Houston. Furbay said Houston is of particular interest because Loews Corporation has a significant amount of investment there through its subsidiaries.

He also cited markets such as Minneapolis, Baltimore and Seattle as targets for growth.

“(Growth will be) where are customers are,” Furbay said. “We look at feeder cities of existing hotels and look where those customers are coming from and going to.

“We're strong in resorts,” he added. “We don't have any cold weather ski resorts so that would be a natural extension.”

The Loews executive said the company would prefer to buy existing properties than build new ones, but some of the markets have extremely high barriers to entry.

“You can wait around forever until the right acquisition comes along,” he said. “Plus, the lead time in building can be tough. In Chicago, it’s a three-year process.”

Global expansion
Loews would also like to get back into Europe, where at one time it had properties in London and Monte Carlo, said Furbay, who joined Loews two years ago.

“London, Paris and other major markets,” he said. “We’re not as focused on Asia. It would take a company acquisition or portfolio acquisition to go there. We’re not actively looking in Asia for a portfolio, but we are looking for one domestically.”

The New York-based company has shed a few assets as well. It sold its former Denver property but will operate it until 20 February because of labor issues. It is also selling the Le Concorde in Quebec City, Quebec.

Additionally, the company committed $180 million for the renovation of existing properties,, including its hotels in Nashville, Tennessee, New York and San Diego.

“That's a big statement about the commitment to the brand.” Furbay said.

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