The Pomeranc Brothers Set a Post-Pandemic Record. Here’s What’s Next.
By Cathy Cunningham March 21, 2023 3:15 amreprints
The market has been wobblier than Jell-O on a space hopper of late. But even before the alarms were sounded on Silicon Valley Bank and Signature Bank, big, flashy, impressive deal closings were few and far between — bringing added excitement (and some sighs of relief) around those that did materialize.
One transaction that not only crossed the finish line but also set a post-pandemic record in the process was the February sale of Sixty Collective’s Sixty SoHo. Standard International paid just over $1.1 million per key to acquire the 97-room boutique hotel, or $109 million.
Jason Pomeranc, co-founder of Sixty Collective, said the sale ultimately came about through “relationships and coincidence.”
Standard International was looking to purchase a high-end asset in New York City to add to its existing portfolio — which includes the Standard High Line and Standard East Village hotels — and Sixty SoHo was the perfect fit.
The trade marked the end of an era, of sorts. The hotel had been in the Pomeranc family since 1998 and was the very first hotel in its Thompson Hotels chain, before being reimagined as a Sixty Collective hotel in 2014.
“Our thinking was, even though it was such an important asset for us, and I think for the industry — as one of the pioneering hotels that started the lifestyle hotels wave in the early 2000s — the number was compelling, and it was a very unique circumstance that we could achieve that price per key in a lending environment that is certainly more challenging,” Pomeranc said.
Indeed, today’s debt markets are a far cry from when Pomeranc co-founded Thompson Hotels in 2001 with his brothers, Lawrence (Larry) and Michael. Back then, “you could borrow 80 percent and didn’t have 2.0 debt service coverage ratios,” he said, likening the competitiveness for hotel lending back then to the appetite for multifamily opportunities today. The lending environment “allowed independent hoteliers and developers like ourselves to expand rapidly — but that has changed,” Pomeranc said.
At a time when financiers are tightening their purse strings — and those strings are likely only going to get tauter — the Sixty SoHo sale allowed the Pomerancs to take out some of their family office money and ready it for recirculation into new opportunities coming out of the current market dislocation — including new asset types, and investments in markets outside of their hometown of New York City.
As the sons of the famed Jack Pomeranc, who developed residential properties as well as hotels, a move into the multifamily sector seems like a logical step for the trio.
“We’re still examining opportunities, but I think there will probably be some multifamily investment because that’s our original family business,” Jason Pomeranc said. “Rising interest rates have created a certain degree of opportunity where you can buy at cap rates that you weren’t able to if you didn’t have a significant amount of equity previously. So we’d like to take advantage of that short window, and deploy some money into that area.”
There’s also a big opportunity to team up with institutional buyers eyeing hotels who aren’t dependent on the debt markets and need experienced partners in the field. “We have dexterity in taking assets that are performing well, but need some repositioning,” Jason Pomeranc said.
Further, as an operating company, Sixty Collective can take a flexible position on those acquisitions. “We can partner with a large institution and provide a skill set that they may need more than our capital,” he said. “It’s somewhere in between asset-light and fuller acquisition.”
The reluctance of some lenders to finance hospitality owners today is baffling, Pomeranc said.
“It’s not just that interest rates are higher, it’s the entire approach to hospitality that makes no sense,” he said. “During an inflationary time, [hospitality is] the asset class that you can adjust the most to cover your downside. A lot of this risk profile around hotels is from the COVID period, which is understandable, but it’s not part of the normal underwriting.”
He likened the trepidation to the period following 9/11. “That obviously was a very impactful event, as COVID was, but it doesn’t fundamentally change the nature of travel — and I think lenders and funds need to come to grips with that because otherwise we’re going to be at a stalemate in this space,” he said.
For now, it opens up a unique window of opportunity for Sixty Collective to partner with firms, and fill both a gap in capital stacks as well as an experience gap for new buyers in the space.
“We’re still tremendously bullish about the hotel business,” Michael Pomeranc, also a co-founder of Sixty Collective, said. “The question we had was, ‘How do we extend as a family? How do we get to where we want to go? And what vehicles do we need to use to get there?’ The attitude of lenders, and how they perceive things today is giving us more insight into how we’ve got to jump around a bit in order to still be able to impress them.”
But “when you get into another asset class, you have the ability to borrow lots more money than you do when you’re just in hospitality,” Larry Pomeranc said.
And the Pomeranc brothers’ unique brand of lifestyle hospitality and creativity will translate to whatever they do next, they said.
“We are not the most brilliant real estate guys, but we are creators,” Michael Pomeranc said. “If you look at our history, we built our hotels, and if we didn’t build them we bought them when they were in subcategories and we redeveloped and recalibrated them.”
With that creativity in mind, Michael Pomeranc said he looks at the sale of Sixty Soho as the sale of a finished, branded product. “Think of someone who yarned a sweater and said, ‘OK, I sold that for a lot of money when I put my label on it, so I’m gonna go yarn another one in a different color and sell it in a different place.’ At the end of the day, we ask ourselves, ‘What can we knit? What can we make and turn into something that we actually love?’ We’ll continue to create wherever we feel that the opportunities are strong enough to let us knit again.”
The start of that ball of yarn began during Michael and Larry’s very early days traveling with their family. The Pomerancs traveled to what Larry Pomeranc describes as the nicest spots in Europe.
“It got into our blood,” he said. Aged 10 and 7 and visiting the Carlton hotel in Cannes, the boys would order crêpes suzette and occasionally sip champagne.
“It spoiled us for life,” Larry Pomeranc said. “We went to luxury hotels all over the world, mainly in continental Europe because our parents had a lot of relatives and friends there, and we stayed in the nicest places, like the Ritz in Paris or the Excelsior in Rome. We just fell in love with hotels.”
Jason Pomeranc came along a little later, but some of his earliest memories are traveling to London and Paris and seeing the level of passion the individual workers in the hotels and their restaurants exhibited. “That really resonated with me,” Jason Pomeranc said. “I think, even more than the travel experience, that passion for hospitality and how people looked at it as a calling. Our employees today are our partners, and I need to feel that same passion [when hiring].”
As such, the sale of Sixty SoHo comes at an important time, as travel to New York City rebounds.
“Post-COVID is like the Roaring ’20s of this century; all everyone cared about was having a good time,” Larry Pomerac said. “If you’re a student of history, you know that the Roaring ’20s eventually led somewhere else, so we threaded the needle, and said: ‘OK, full speed ahead, let’s eat, drink, party, let’s have a good time,’ because hospitality was in the toilet during COVID, then it became the pinnacle.”
As a result, resort hotels are now on Sixty Collective’s radar.
“Resort properties are something that we would love to get into on a bigger scale because — I think at least for the next decade — that’s going to be something people want,” Larry Pomeranc said. “As technology and AI and everything else gets more and more sophisticated, you could be sitting on a beach in the Maldives and doing all your work from there.”
Leisure travel within big cities is still a big focus for the brothers, however.
“When you look at cities like New Orleans, tourist cities like Washington, D.C., and certainly the Austins and Nashvilles of the world, there’s a lot of growth there because of demographic change,” said Jason. “There’s a lot of investment by various corporate entities — tech and otherwise — and there’s a migration of Generation Z. But those cities combine leisure and business, and I think that’s where the future probably is going to be for us.”
The next chapter
As the brothers turn the first page in their next chapter, they reflected on the sale of Sixty Soho — whose name will remain for the foreseeable future — with some nostalgia but not regret.
Years ago, Jason Pomeranc interviewed Public Hotel’s Ian Schrager while guest editing for Design magazine, and received some sage advice from his hotelier rival: “Don’t ever ever get attached to bricks.”
“Hotels are like no other asset class in the bond that you form and the emotional attachment that you have to them,” Jason Pomeranc said. “[Schrager] told me that when it’s time to sell something you’ll know it, and the real issue is not that this chapter is closing, rather how you’ll challenge yourself next. That rang true in this sale.”
The Pomerancs are looking forward to those new challenges, while still respecting the chapter that just ended — where they sold for a record price. “While I’m certainly proud of the number we got, I don’t think it was unfair,” Jason Pomeranc said. “I think it was worth it.”
The firm just opened a Civilian Hotel in Times Square, a more affordable-luxury brand they see “tremendous growth opportunity” in, Jason Pomeranc said.
The hotel, at 305 West 48th Street, draws on glitzy inspiration from Broadway, with heavily draped velvet curtains and gilded touches throughout, plus a rooftop overlooking the Great White Way.
It’s a new building, but “we see that the market is coming to an end of its useful life on a certain generation of hotels, whether they were built in the ’80s or ’90s, and they have a certain cost to reposition and revive,” Jason Pomeranc said. “I think we can breathe new life into some of those assets with a Civilian product. The big opportunity there is going to be in repurposing older hotels — larger, older hotels. And those opportunities will be prolific when you hit the end of 2023, because I don’t believe the other buyers or the other operators are looking at the building through the same lens.”
With that in mind, and wherever future investment opportunities take them, the Pomerancs are “still bullish” on the Big Apple.
“We live here, we’re from here, and we’re not going anywhere,” Jason Pomeranc said. “But, we’re very vocal when it comes to our concerns about taxation, crime, cleanliness, operational costs and various other political issues that make the city somewhat challenging at times. I think it’s important to align the city’s interests with hospitality, because it’s an industry that drives the entire city.”
Cathy Cunningham can be reached at email@example.com.