Waterton Heads into Hospitality

Waterton Associates' David Schwartz tells us the private equity firm he co-founded 18 years ago, known for multifamily, is rapidly branching into hotels as well. The move is meant to take advantage of better values in core markets. David tells us that they're targeting about 10 or 15 areas across the country with strong demand drivers. He thinks it's a good time to find distressed assets starved for capital and that limited room supply due to restrained development in recent years has created great upside. Waterton first acquired a hotel in 2006 but decided in 2010 to create a separate entity, Ultima Hospitality, that would do its own management and balance sheet with in-house experts on F&B, yield management, marketing, sales, and guest satisfaction scores.

This morning we snapped Ultima co-head Nir Liebling (the finance side), a product of Wharton and the Cornell hotel school, with colleague Mark Zettl, who runs the operating side. Nir's first job in the industry, he tells us, was waiting tables at a country club in Japan during high school. (We all have to find ways to earn some extra yen in high school.) Although they already manage and own 1,700 keys from Mill Valley, Calif to Chicago and Framingham, Mass, David says Ultima's position reminds him of where they were in residential in the late '90s, except that now they have the benefit of long operating experience and robust fundraising and back office platforms. Nir sees this "institutional backbone" as their differentiator as they seek "middle market single assets" in the $20M to $50M range, especially full-service with greater barriers to entry than limited service. The plan: Grow quickly.