Business & Finance

Strand Development to Expand 70-plus Hotel Portfolio

Into U.S. Midwest and West Coast within Three to Five Years

CHARLOTTE, NC / MYRTLE BEACH, SC - February 1, 2012 - Strand Development Co., LLC, a major third-party hotel operator, today announced plans to expand further into the Midwest and to the West Coast within the next three to five years. In the past 24 months, the company has extended its management reach well beyond the Carolinas, adding hotels in Virginia, West Virginia, Pennsylvania, Maryland, Georgia, Tennessee, Alabama, Mississippi, Louisiana and Michigan to its growing management portfolio.

“2011 was a breakout year for Strand,” said John Pharr, president of Strand Development, Co., LLC. “We transformed from a narrowly focused company managing hotels in a handful of states to a hotel operator with a geographically diversified, 70-hotel portfolio in 12 states and a solid footprint east of the Mississippi. We have significantly upgraded our proprietary management systems and infrastructure, not only to provide improved service for our existing clients, but to prepare for continued, measured expansion on an on-going basis. Our goal is to grow by approximately 20 to 30 percent annually, focusing on further filling out our managed portfolio east of the Mississippi, especially the Midwest, Florida and the Gulf Coast, and eventually expanding westward, to become a truly national operator.”

Pharr said that Strand’s business model is to remain a “pure” hotel management company. “Most other major hotel management companies have multiple divisions,” he said. “Today it is not uncommon for third-party operators to own, operate, develop and even broker hotels. We believe this diversification may be good for the operator but deflects their attention away from the reason they were hired…to manage the hotel. With our business model, I don’t have to worry about paying mortgages on Strand’s hotels; instead I’m able to focus on making sure that our owners can pay theirs.”

Strand’s managed portfolio focuses on hotels and resorts in the mid-market through upscale range. In addition, Strand has gained expertise in various levels of the extended-stay market with more than 20 properties in the current portfolio. “Our management team has extensive experience in those segments and a strong background in food and beverage operations. While F&B can be a major revenue-generator for full-service hotels, accounting for as much as 30 to 40 percent of overall revenues, too often it’s not an equivalent profit-generator. We subscribe to the theory that F&B must pull its weight on the bottom line, not be a loss leader.”

Pharr noted that going forward, the company will concentrate on select and full-service hotels and resorts in the 80 to 300-room size. “We have taken on individual properties as well as portfolios of as many as 25 hotels and have the infrastructure in place to handle both,” he pointed out. Strand has strong relationships with all the major brand families, including Marriott, Hilton, Starwood, Wyndham, Choice and International Hotel Group, and has a proven track record in all locations, from urban to roadside, airport to suburban and resorts.

Strong RevPAR Growth
Pharr said that Strand’s success in dramatically improving revenues and controlling cost has fueled the company’s expansion. In 2011, Strand’s managed portfolio outperformed the industry average.

The company has seen a rise in lender-owned assets seeking interim management and has taken over 22 REO properties in the past three years. “We are quite comfortable acting as both receiver and/or manager for troubled assets depending on the lenders’ needs and the circumstances,” Pharr said. “About 10 percent of our portfolio currently is lender-owned. Based on conversations with lenders, we expect to see a steady increase in REO properties over the next two years. We have increased our corporate staff by some 30 percent in the past few years, including adding an experienced asset manager who works closely and exclusively with our lenders and special servicers to optimize returns while they hold the hotel. Bank-owned assets will always be an important part of our business, but the majority of our portfolio will continue to be performing properties.”

Team Approach
Pharr said Strand’s ability to quickly turn around a hotel is a direct result of its low asset to management team ratio. “We assign a four-professional team, including a regional director of operations, sales and marketing manager, an accountant and an internal auditor to oversee each asset,” Pharr said. “Each team supervises an average of only 12 properties, about 20 to 30 percent fewer than most hotel management companies.”

About Strand Development Co. LLC
With headquarters shared between Charlotte and Myrtle Beach, Strand also has operations in Atlanta. Founded more than 40 years ago, the company began as a developer/owner of full-service Holiday Inns, gradually moving into third-party management. Today with more than 70 hotels in its management portfolio, the company is one of the few major operators that focuses entirely on third-party management. The company specializes in the two- to four-star hotel segments and is approved to operate hotels under all the leading hotel brand families, including Marriott, Hilton, Starwood, Wyndham, Choice and InterContinental Hotel Group

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