Palm Holdings seeks value in under-performing hotels

IMAGE: Some of Palm Holdings hotel properties in Canada. (Image courtesy Palm)

Some of Palm Holdings hotel properties in Canada. (Image courtesy Palm)

Palm Holdings’ acquisition of an interest in 12 former InnVest Hotels is a strategy the family-run business plans to employ again, says managing director Anil Taneja.

“We’re very actively seeking more acquisitions and looking at recycling lower-grade real estate portfolios,” he says.

The joint venture acquisition of the InnVest portfolio in March 2018 expanded Palm Holdings’ national presence with hotels across Ontario, Nova Scotia, Alberta, Saskatchewan, and Quebec.

The acquisition brought more than 1,700 rooms and more than 500 employees into the Palm Holdings hotel portfolio, which now numbers more than 2,200 hotel rooms in Canada, the U.S. and U.K.

InnVest was “the largest portfolio acquisition that we’ve done and we now like that model and look forward to doing more.”

History of family-run business

The family business got its start when Taneja’s grandfather, Amar Nath Taneja, ran away from an orphanage in India at age 12 and eventually made his way to Nairobi, Africa. There, he opened a small restaurant. Soon after, he also bought the apartment building above the establishment, which in 1950 became the Amar Hotel, the family’s first.

After the hotel was expropriated by the Kenyan government, Taneja’s father and uncle restarted the family business by buying an 82-bedroom hotel in London. Other hotels throughout the U.K. were bought, renovated and resold. In 1983, the family business bought money-losing hotel booking agency First Option and turned it around.

The company expanded into Canada in 1997 with the acquisition of Inn on the Lake, which underwent an $8-million renovation and became the Four Points Sheraton, Toronto Lakeshore.

The family businesses were aligned under the Palm Holdings name in 2007. Palm Holdings includes hotel management company Palm Hospitality, Palm Construction, a general contractor with a focus on hotels, and Palm Ventures, which buys and sells real estate.

The company entered the U.S. in 2013 with its acquisition of the Paradise Coast Hotel in Naples, Fla., which it transformed into the Holiday Inn Express and Suites Fifth Avenue. In 2016, Palm Holdings acquired its largest hotel, the 444-bedroom Holiday Inn Orlando, Celebration in Florida.

Palm seeks underperforming assets

The company says its mission is to acquire underperforming real estate and create value through capital improvements and hands-on management.

Taneja and his two younger brothers Rajan, executive vice-president, and Anish, senior vice-president, now run the company.

In Canada, Taneja is buoyant about the Montreal area market, where Palm Holdings now owns Quality Hotel – Montreal East and Quality Suites – Laval.

While the business community wasn’t looking at Montreal 10 or 15 years ago, the city is now seeing growth, profits and momentum: “The fundamentals will drive more people from Ontario, from Alberta, from B.C., to Montreal.”

Prices are “still respectable” compared to Ontario, where “a lot of capital is chasing the same deals,” he says. “We’re very, very interested in the Quebec market. That’s one of our major target markets right now.”

Another target market is Alberta.

However, the challenge in the province is that the sentiments of sellers and buyers usually don’t match. While sellers believe the economy will turn around tomorrow, “there’s a lot of uncertainty in how long it’s going to take.”

Still, he believes there is “more and more opportunity coming” in Alberta.

Invest in capital improvements

Taneja says the company prefers to buy and reposition sites which are underused in terms of capital, management, branding or marketing. It often buys from owners who find their properties no longer align with their strategic goals, or who would prefer to place capital elsewhere.

“We’re not afraid of whatever size capital improvements are needed. There’s been many a time where we’ve spent more capital improving the building, than we have on the building itself,” he says. “Our preference is usually to take the buildings down to the bone and rebuild the interior. We want those buildings to last a very long time.”

Taneja says he and his brothers have the advantage of being “able to chase deals while we’re younger guys” and follow a long-term operating strategy.

“We want to be in markets where we can see ourselves growing in the next 40 or 50 years. We don’t anticipate leaving this business. We think our investment horizon is far longer than everybody else’s.”

Offices in Toronto, London, Orlando

The company has more than 1,000 employees, and two main offices in Toronto and London.

There is also a smaller office in Orlando, Fla., and plans for a Montreal office. “We can sort of see all of Florida from Orlando,” Taneja said, adding a Montreal office will allow for greater access to the East Coast.

Taneja says for the next few years the company will follow a “two-fold, opposing strategy” which includes preservation of existing capital and geographic growth with more hotels added.

“We’re very geographically spread out,” he notes. “That’s our way of hedging ourselves.”

Danny is a multiple award-winning journalist based in Montreal, who has written for about 75 magazines and newspapers in Canada and the U.S. His credits include The Globe and Mail,…

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Danny is a multiple award-winning journalist based in Montreal, who has written for about 75 magazines and newspapers in Canada and the U.S. His credits include The Globe and Mail,…

Read more

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