The Long Game
by David Ball
The dominant resort player in the region, family-run Ocean Properties says it's here to stay.
MARK WALSH HAS WORKED NEARLY EVERY JOB in the hospitality industry. With a father who built hotels across New England, he had no choice but to start young. At 12, Walsh was bussing tables and washing dishes. Next he was cleaning pools and mowing the grass. Handling luggage and working the front desk was a welcome promotion.
“It was important to learn what all the jobs entail and the hard work it takes to create a great experience for the guest,” Walsh says.
It was a philosophy instilled by his father, Tom Walsh, who formed Ocean Properties in Maine in 1969 as a family-owned and family-run hotel operator. Forty-five years later that philosophy continues, though the business has become just a little bigger.
Today, Mark Walsh, 59, and his three brothers and a sister run one of the largest privately held hotel management and development firms in North America, with more than 100 properties under ownership.
Ocean Properties has long eyed the beach markets along Sarasota and Manatee counties, and it’s now a dominant player here, with recent acquisitions of marquee resorts that include the expansive Longboat Key Club & Resort and Helmsley Sandcastle Hotel.
The company’s local portfolio also includes the Holiday Inn Lido Beach, Hilton Longboat Key Beachfront Resort, Lido Beach Resort, Courtyard Bradenton Sarasota/Riverfront and the Chart House restaurant property adjacent to the Longboat Key Club. It made a bid for a portion of the defunct Colony Beach & Tennis Resort, but that sale has been held up by litigation between the original developer and condo owners.
Ocean Properties is the largest hotel owner and operator in Florida.
Ocean Properties, headquartered in Delray Beach, with offices in New Hampshire and Canada, has built a reputation of steady growth with aggressive hotel acquisition and development. It targets underutilized or failing properties, usually on bodies of water, across New England, the Southwest, Canada and the Caribbean. The company’s biggest presence is in Florida, where, with 30 properties, it is the largest hotel owner and operator in the state.
In Sarasota, some have speculated that Ocean Properties will redevelop some of its hotels into more lucrative condos or other uses. But company officials say that’s not their business model, though some expansions are planned. And Ocean Properties won’t be selling off its properties in a few years for a quick profit, they say.
Despite its size, the company is still run like a family business, and company leaders say that means keeping hotels mostly intact, investing in repairs and renovations, improving working conditions for employees and being long-term stewards in the community. That could mean a growing Ocean Properties empire if the local market remains favorable.
“We feel that Sarasota is a great area. The overall area is growing, there are a lot of positives and the beaches are great,” Walsh says. “Having said that, the hotel business is cyclical; it goes up and it goes down.”
Sarasota’s tourist economy has rebounded significantly since the recession. Tennessee-based STR, which tracks hotel occupancy, room rates and supply and demand figures for the industry, reports strong increases in nearly every measurable statistic in the Sarasota and Bradenton markets, especially compared to the rest of the state and the U.S.
According to STR figures, Sarasota-Bradenton hotel occupancy averaged more than 75 percent through the first six months of 2014, up from 59 percent for the same time period in 2009. Florida as a whole grew from 60 percent to about 73 percent during that same time, while the national average rose from 54 percent to about 64 percent. Spring break months of February and March this year saw occupancy rates approaching 90 percent in Sarasota-Bradenton, compared to about 80 percent for the state and 65 percent for the U.S.
Average room rates in Sarasota-Bradenton also increased around $7 since 2009, and the revenue each room generated for the hotel increased about $17. But the greatest indicator of a market’s health, says STR senior vice president Jan Freitag, is supply and demand. Since 2009, the supply (number of hotel rooms multiplied by the days available) grew a fairly healthy 117,840, while the demand (number of hotel room days sold) grew by more than 432,000.
“That’s a healthy increase in room demand,” Freitag says. “So it’s no surprise that someone wants to be a part of this market.”
Ocean Properties officials, however, say they are concerned about the 20 percent rise in construction costs they’ve seen in the past year, as well as the potential for overdevelopment in areas like downtown Sarasota, where about a dozen hotel and condo projects are planned. A hot local market is not the dominant factor in determining what they buy.
“We are attracted to the property first,” says Andy Berger, vice president of operations. “Either it’s poorly managed and we can bring in better management, or we can bring in money to fix up the hotel. A lot of times hotels are for sale because they haven’t been well maintained. Usually we can come in, fix them up and run them better. If it’s in a great place like Sarasota, that’s even better.”
Case in point is the Longboat Key Club, which Ocean Properties purchased in 2012. Berger and Walsh say they’ve spent nearly $6 million in golf course renovations plus other upgrades and new equipment just to bring the sprawling high-end resort in line with others around the state. Ocean Properties plans to expand the club with new conference space, hotel rooms, commercial space and even residential units. The company last year purchased an adjacent three-acre property that includes the Chart House restaurant and shops.
“We are not condo developers.”
The club’s previous owner’s redevelopment plans were effectively blocked by Longboat Key neighborhood groups who complained that the project didn’t fit the island community. Walsh says he expects to work closely with those groups and Longboat Key elected officials.
“We will be sitting down with the neighbors and the town and start the process of getting everybody’s input and incorporating that into some plans we can bring forward,” Walsh says. “Our goal, no matter where we go, is to try to bring something in that fits with the community and also with the surrounding neighbors. Our relationship with our neighbors and town is something we take very seriously.”
bigger test of Ocean Properties’ willingness to keep hotels operating as hotels might come from its purchase this year of the Helmsley Sandcastle Hotel on Lido Beach for $27.4 million. The hotel, once owned by New York hotelier Leona Helmsley, was built in 1953 and has likely reached the end of its lifespan and is primed for redevelopment, says Barry Seidel, president of commercial real estate brokerage firm American Property Group of Sarasota.
“They are probably running it as an ongoing hotel until they get all their ducks in a row to develop the property to something that’s going to make them a lot of money,” Seidel says. “I was just out there, and every ounce of my body tells me they are going to operate it until they can redevelop it, probably with condos.”
Ocean Properties officials say they haven’t made any decisions on the property beyond routine maintenance upgrades. Berger says, “We’re a hotel company. That’s 95 percent of what we do. I’m sure if we were condo developers we would love that real estate. We are not condo developers, we are hotel people.”
The company keeps its development plans close to the vest, and it doesn’t divulge business details like revenue figures and number of employees. They say that’s part of keeping the company private and family-run, something that likely won’t change anytime soon.
“We are long-term holders of real estate. We are not sellers,” Walsh says. “We’ve got hotels that my dad built in the 1960s we still own. We put more money into the projects, because we are in it for the long term. We know coming into an area that we will be there for a long time.”
What They Own
CHART HOUSE PROPERTY, 201 Gulf of Mexico Drive, Longboat Key: purchased in 2013 for $6.2 million; more than 18,000 square feet of restaurant and commercial space on nearly three acres adjacent to the Longboat Key Club & Resort.
COURTYARD BRADENTON SARASOTA/RIVERFRONT BY MARRIOTT, 100 Riverfront Drive, West Bradenton: built in 1984 by Ocean Properties as a Holiday Inn; 150 rooms; renovated and converted to Marriott in 2009; property valued at $7.2 million.
HELMSLEY SANDCASTLE HOTEL, 1540 Benjamin Franklin Drive, Sarasota: built in 1953 and purchased in 2014 for $27.4 million; 177 rooms; zoned for 108 condo units, though no redevelopment plans have been announced.
HOLIDAY INN LIDO BEACH, 233 Benjamin Franklin Drive, Sarasota: purchased in 2002 for $13.9 million; 135 rooms.
HILTON LONGBOAT KEY BEACHFRONT RESORT, 4711 Gulf of Mexico Drive, Longboat Key: purchased in 2002 for $15.2 million; 102 rooms; currently undergoing $25 million expansion and construction of 85 new rooms.
LIDO BEACH RESORT, 700 Benjamin Franklin Drive, Sarasota: purchased in 2006 for $62.5 million; 220 rooms.
LONGBOAT KEY CLUB & RESORT, 220 Sands Point Road, Longboat Key: purchased in 2012 for $32 million (includes land and buildings only and not the business operations and other assets); 222 individually owned rental condos, 45 holes of golf, tennis courts and six restaurants on 410 acres; nearly $6 million in golf course improvements and other renovations completed.