The daughter of an architect-turned-residential real estate developer, Maki Nakamura Bara likes to describe the “aha moment” when she decided to focus on the hotel industry: “I was a 22-year-old general analyst at a real estate investment firm with a small hotel division. I was first sent to Fort Worth to see an office building, which was fine, but then, the next week, I was sent on my own to the Westin Maui, and that was it for me!”
Now, Bara has two titles. First, as president and co-founder of The Chartres Lodging Group, LLC, she is a leading expert in redeveloping and repositioning urban hotels, resorts, convention hotels, and conference centers. She is also co-chairman of Kokua Hospitality, a management company based in San Francisco.
Bara says after gaining experience in various positions over the years, in 2002, she and now-partner and Chartres CEO Robert Kline—who had been her first boss, mentor, and colleague—decided to start their own company. “We had worked together at three different companies but were basically doing the same thing—buying hotels, managing the assets, and adding value. In 2002, we decided, ‘Let’s do this on our own’.”
While they briefly considered investing in a small property themselves, she says, “We decided to stick to what we knew,” pursuing large institutional-quality assets and purchasing them with capital partners with whom they had relationships.
Their first hotel purchase was of the Pan Pacific—now the JW Marriott in Union Square in San Francisco—with Goldman Sachs. Next, after they had expanded their business to Japan, was a joint venture with Goldman Sachs to purchase five hotels in a portfolio from a chain company in Japan. “It was really the first time non-recourse debt was available in Japan, the first time an outright equity purchase was being done and not through an NPL portfolio,” Bara explains. “We were also very fortunate to be at the right place at the right time then.”
However, she says, “We didn’t want to just ride the market; we wanted to make sure an asset had enough internal growth that we could change something and turn it around.”
Describing the niche she and Kline now occupy, she says, “I think our passion and our expertise is really in that valued-added space. We look for a property in a great market or location that is broken—especially a complex asset where we can be competitive. This strategy has proven successful for us, as our realized IRR since 2002 is 65 percent.”
She specifies the three things they consider in order to add value: operations, physical look of the property, and brand. And, because they are mindful of their eventual exit—presumably via sale to an institutional buyer—she says, it’s best that the property be under their radar. “We can go in and fix all of these things and make it attractive for an institutional buyer who would have never considered it previously.”
Her favorite example is The Hyatt Place in Waikiki. “It was a dated two-star property and it needed a lot of capital love. We saw it as a diamond in the rough.” Chartres spent more on the renovation than the purchase price. “There were a lot of problems—structural, environmental, mechanical—so we really redeveloped it as opposed to just renovating it.” They also managed to keep it open throughout the renovation process. “We did one tower at a time and had temporary lobbies set up. It’s important to maintain a hotel’s business during major renovation such as this one because of negative cash flow, debt needs.”
Knowing there was a void in a market that consisted mainly of luxury beachfront hotels and tour travel hotels off beach, the partners believed the newly overhauled property would appeal to both the east- and west-bound traveler. “This property really wanted to be special again and it was. In the end, we ended up executing an exit much sooner than we had anticipated.”
Bara says she still considers it “more fun and sexy to handle hotels than office buildings,” but for different reasons. “Just as my father loved creating a living space to make a family happy, from a personal perspective, I enjoy doing the same thing—creating an enjoyable living space—during their stay in a hotel, whether it’s for one night or one week. From the business perspective, I find this industry exciting and dynamic; it allows us to use our creativity more than if we had fewer touch points.”
