With a focus on investments, AWH Partners expands portfolio

NEW YORK—AWH Partners focuses on the investment components of hotels first. It’s this strategy that has turned the company into what it is today.  

“AWH is one of a small number of hotel owner/operators that are investors first,” said Russ Flicker, co-founder and managing partner, AWH Partners. “Our backgrounds at large, institutional investment and development companies (Blackstone and The Related Companies) have led us to approach every project from that standpoint. We have a robust management company and development business that all work in cohesion, but those businesses also are investment driven. They are led by executives with institutional investment backgrounds (Chris Russell leads Spire Hospitality and was formerly CEO of Archon Hospitality for Goldman Sachs, and Tim Osiecki leads AWH Development and was former head of development for Concord Hospitality), but they get involved from the very beginning of sourcing and underwriting deals. Our teams work together from ‘cradle to grave’ on our investments.”

Today, the company’s portfolio consists of 25 properties, totaling 7,145 keys. “We tend to own larger hotels,” Flicker said. “This is because we have an expertise with complicated, dynamic assets such as hotels and resorts that have significant meeting space, multiple food and beverage outlets, and/or significant spas or retail.”

Even though AWH specializes in full-service hotels and resorts properties, there’s not a single property type the company targets.

“There are very specific things we are looking for from a transaction,” he said. “Since we are hospitality focused, we have invested heavily in technology to help us sift through the wide variety of potential assets. This is separate and in addition to technology that helps us manage assets—it is technology that helps us monitor and compare hotels that are for sale or may become available for sale. This technology not only helps us compare assets of similar brand, size or geography against similar hotels that traded sometimes years ago, but it also helps us monitor how hotels performed in the recent past since previously for sale and compare against how we thought it would perform.”

AWH’s focus on leveraging data during the underwriting process is only the beginning of its review process. “Through this technology and our boots on the ground in all three of our business lines (investment, development and management) across the country, we are able to identify and focus our energies on transactions where we have controllable, value add and/or there is a market inefficiency we can exploit,” Flicker said. “Controllable value add could be operational or physical repositioning, and market inefficiencies are often the debt or equity markets misjudging or mis-valuing assets based on short-term trends or what we call ‘headline risk,’ which occurs when the facts sound worse on the surface than they do if you spend real time digging in and understanding how to mitigate them.”

Russ Flicker
AWH Partners

Regarding portfolio strategy, it changes over time. “Our strategy continues to evolve,” he said. “We initially bought assets in distress—through buying the underlying debt or buying assets out of bankruptcy—and today that is much less common. We now are finding better opportunities with significant in-place cash flow with quantifiable upside. That being said, it is certainly very hard to find good opportunities, and it often takes us six to 12 and even 18 months working on a specific asset before we can transact.”

Despite its growth, the company has had its fair share of challenges over the years. “We have gone many months—and even years—having spent countless hours and dollars sourcing and underwriting transactions that don’t ultimately close for any number of reasons; it has been a real focus of ours to mitigate that,” he said. “The reality is, of course, that is a big part of the business, but using our experience and leveraging our resources, such as technology, we have improved by focusing more heavily on transactions that have a high likelihood of transacting—based on the asset, the sale dynamic, the seller, the competitive landscape, etc.”

AWH also faced many obstacles while scaling the business. “From the perspective of growing a business that we started in 2010 with only ‘entrepreneurs with cellphones’ as we like to say, the challenges have been numerous and often humorous,” Flicker said. “We began as CEOs and mail-room attendants while working with some of the most sophisticated and mature investment professionals in the world. It has been a wild, fun and often frenetic ride that we wouldn’t change for the world.”

One of the key contributors to AWH Partners’ success is Spire Hospitality, the company’s sister management company. “Led by Chris Russell and several other senior executives who worked previously running Archon Hospitality and then Pillar Hotels & Resorts, Spire is certainly part of our ‘special sauce’ in growing RevPARs and NOIs at our hotels. It comes back to the very same thing that we think makes AWH special—Spire manages every hotel like it is an owner,” he said.

Russell’s impact on the organization is pulled from his experience elsewhere. 

“Archon Hospitality started out managing only owned assets for Goldman Sachs and so Chris’ ethos is exactly the same as ours,” Flicker said. “It is also worth noting that in a time when management companies continue to consolidate and get larger, Spire can still give very individualized attention to hotels and hotel owners because of its size.” 

While the markets are faring well, there’s still some concern in the industry. “The current environment is certainly quite fluid with growth slowing in many markets—this slowing can be caused by slowing or flattening demand, but also by significant supply growth in many cases,” he said. “Coupled with the age of the cycle, that leads us to be extremely cautious in how we approach underwriting future growth, how we look at debt financings, etc.

“We are trying to build a business that will be around for 100 years,” he continued. “In just a few months, we will mark our 10-year anniversary, and while we are excited about what we have built and the direction of the company, we know we need to continue to push to stay on top of technology and market changes. Being successful last year is no guarantee of success next year, so we are focused on delivering for our investors and we are confident that will lead to our success.” HB

To see content in magazine format, click here.