It started less than 10 years ago with the purchase of one hotel — a charming 179-room property called Temple Gardens Mineral Spa Resort, located in the heart of Moose Jaw, Sask. Under the leadership of real-estate veteran Arni Thorsteinson, the Moose Jaw property was purchased for $26 million in 2006 by Temple REIT, a new publicly traded real-estate investment trust formed in October 2006. The Temple Gardens purchase was its first qualifying transaction. “From that date on, we embarked on an acquisition program to gain additional properties and really grow the REIT,” explains Gino Romagnoli, EVP of the Winnipeg-based hotel ownership company.
And grow it did. Today, the publicly traded company (now called Temple Hotels Inc., after evolving from a REIT to a corporate entity in 2012) has 100-per-cent ownership of 30 properties from coast to coast as well as 50-per-cent ownership of two additional properties.
After a solid start during the first couple of years of its acquisition program, its growth slowed during the economic downturn of 2008/2009. But Temple’s leaders stayed the course, and, by late 2011, the company was acquiring hotels at a rapid clip. The team purchased two properties at the end of 2011, four in 2012, seven in 2013 and six in 2014. “Company-wide total revenue for 2014 was $188.4 million,” says Romagnoli. Occupancy for year-end 2014 was 67 per cent overall, with $149 ADR and $99.62 RevPAR.
Temple’s “big picture” goal of consolidating hotel ownership in Canada, its ability to successfully combine a collection of varying brands and independents, and the geographic diversification of its properties are all factors that have driven its success. “We set out to have a geographically diversified portfolio, but we started out acquiring hotels in Fort McMurray, (Alta.) and throughout Alberta in 2007 and ’08, when there were properties that had been built by merchant builders who weren’t interested or didn’t have the expertise to properly operate them,” says Thorsteinson, noting that in the company’s early days, its leaders bought five properties in Fort McMurray, followed by a couple of hotels in Yellowknife and Regina. “Then we moved across the country, so now we have a presence from New Westminster, B.C. to Sydney, N.S. on Cape Breton Island.”
With a portfolio of hotels spanning seven provinces and territories, Temple executives have achieved their “geographically diversified” goal, although they do admittedly tend to target secondary markets as opposed to the big cities. Indeed, there’s a particular focus on those markets that cater to the oil and gas industry, such as Fort McMurray. “In terms of number of rooms, the West represents about 70 per cent of our rooms, and the East, being Ontario to the Maritimes, represents about 30 per cent of our rooms,” says Romagnoli.
When determining which properties to buy, market presence is a key factor. “We want to be [among] the top five hotels in the market segment we’re operating in,” Thorsteinson says. The team also looks for good opportunities such as acquisitions of properties with a strong market presence whose owners are approaching retirement. “A lot of those individuals and families have been in the business for 30, 40 or 50 years and their children, in many cases, became lawyers or nurses or teachers; they [aren’t] interested in continuing the family business, so there have been a lot of very good properties being offered for sale,” Thorsteinson says.
Some of Temple’s properties are independents and some are branded, such as Wyndham, Marriott, Radisson, Cambridge Suites, Days Inn and Hilton. Upon purchasing an independent hotel, the Temple team will closely examine the property to determine if they want to keep it as an independent or convert it to a brand. And similarly, if the hotel they’ve purchased is already branded, they will determine if it’s flagged under an appropriate brand or if it needs to be rebranded, based on competition in the marketplace and various other factors. “When we acquired the Hotel Saskatchewan [in Regina], for instance, we determined that Marriott Autograph would be a more appropriate brand than Radisson for that particular property,” says Thorsteinson. Properties represented by The Autograph Collection by Marriott are located in dynamic cities and reflect a unique, upper-upscale spirit of individuality and originality.
Winnipeg-based Shelter Canadian Properties Ltd., a privately owned real-estate and property-development company helmed by Thorsteinson, is Temple’s asset-management company. And all of its properties are managed by Montreal-based Atlific Hotels. That said, the leadership team is planning to internalize asset management and property management over the next few years. “We’ve [now] got the critical mass that justifies, financially, to have internal management in place,” Romagnoli explains.
Since the bulk of Temple’s properties are in the West, the economic difficulties of Canada’s oil industry in 2015 have had a significant impact on the hotel ownership company. “The decline is preventing us from raising more money and acquiring additional properties,” Romagnoli confesses.
But the company has weathered the downturn of 2008/’09, and the team knows how to keep ahead of the curve. Temple execs are taking a break from actively seeking acquisitions; instead, they are improving the properties the company already has. “We’re growing into our portfolio this year,” says Romagnoli. “There are several properties we acquired recently that require capital expenditure programs.”
He cites the 224-room Hotel Saskatchewan in Regina, which Temple purchased in 2014 for $32.8 million, as an example. “We plan to redo the common areas, including the lounge, the restaurants, the meeting rooms,” admits Romagnoli. “So no big structural changes but basically some modernization and beautification.” There was a similar top-down renovation program at Temple’s Saskatoon Inn and Conference Centre, which was acquired in 2012 for $37 million. “We’ve spent $50 million in capital expenditure over the last three years on upgrading our hotels,” says Thorsteinson.
The CEO is philosophical about the company’s current economic-induced focus: “We acquired six new hotels last year, so we need a little bit of a breather,” he says, noting that the future is bright, as the overall economy and the oil industry, in particular, begin to rebound. “We expect to be acquiring new hotels again by 2017,” he says confidently.
Volume 27, Number 4
Written By: Carol Neshevich