At the Center of the Action
DLJ Real Estate Capital Partners and Grand Ventures Hotel aren’t the only owners drawn to hotel deals in transitioning neighborhoods. Arbor Lodging Partners saw an opportunity to position itself at the center of a revitalized downtown area when it purchased the historic Hotel Phillips in Kansas City, Mo., late last year. One of the company’s investment strategies focuses on urban value-add deals, and Hotel Phillips hit the nail on the head, CEO Vasmi Bonthala explains.
“What excited us about this deal, and what we thought provided such a great upside opportunity, is that it’s a unique historic property, so it’s irreplaceable,” he says. “You can’t build something like that today. It’s a really wonderful property in a downtown core that is seeing huge amounts of growth and transformation.”
Twenty years ago, downtown Kansas City was not a particularly appealing place, but it started to turn around about a decade ago with some major city-backed investments, Bonthala explains. Since then, the downtown population has quadrupled, he adds, and new jobs, shops, restaurants, and attractions have followed. “It’s still very much a developing larger neighborhood, when you think about it from a perspective of people living there, not just working there,” Bonthala says.
While the existing asset had a fairly good name in the marketplace, Hotel Phillips was starting to get a little tired, Bonthala says. “We thought with some real capital in the hotel, we could reposition it to be more relevant from a design perspective to what guests want today. It’s a prominent building in a prominent location downtown, and we’re trying to make this asset something that the whole community can be really proud of.”
Arbor Lodging’s affiliate, NVN Hotels, will manage the property as Arbor oversees an extensive renovation and revival of the 217-room, full-service hotel. Originally opened in 1931, Hotel Phillips has been listed on the National Registry of Historic Places since 1979 and has hosted many celebrity guests, from Tina Turner to John Barrymore. The neighborhood offers an array of nightlife and entertainment options, including live music venues at the adjacent Power & Light District, the neighboring Spring Center, and events at the Kansas City Convention Center.
Arbor aims to highlight the hotel’s history while repositioning the property to be an experience-driven, lifestyle hotel with new food and beverage outlets and creative programming. Hotel Phillips is expected to join Hilton’s Curio Collection in 2017, upon its completion.
The concept for the hotel’s new restaurant and bar is still in the planning stages, Bonthala says, but it will offer high-quality, chef-driven fare in a comfortable atmosphere for guests and locals. Activating unused space and creating new profit centers are also key elements of the project. One of the hotel’s street level entrances has been blocked off and used as storage, so Arbor intends to clean out the area and put in a coffee bar with a local coffee company. After looking at the hotel’s original plans, Arbor also discovered that a floor was ripped out at some point and replaced with a big open staircase. Arbor intends to rebuild the floor to make way for a speakeasy-inspired cocktail lounge underneath it. The check-in desk and retail will be moved to the space currently occupied by the open staircase, so passersby outside will see activity when they look through the window.
“You have all these apartments, from Class B to Class A, within walking distance of the hotel, so we really wanted to make sure we had a property that, in addition to having a bunch of great outlets for the hotel guests themselves, could also have the coffee shop, the restaurant, and the bar that neighborhood folks would want to go to and hang out,” Bonthala says.
Arbor sees a lot of opportunities in secondary markets like Kansas City that have built-in history and attractive infrastructure, because they haven’t seen the same influx of capital for hotel projects as primary cities. People who migrate to downtown cores want to be within walking distance of exciting places where they can enjoy a meal or a drink, Bonthala says, and Hotel Phillips seeks to fill that void. “Folks in the market are just as hungry for that type of product and experience as people in other markets,” he says. “People used to think they needed to go to a New York or a San Francisco for something like that. Now they’re saying, ‘Why can’t I go to Kansas City and have a similar experience?’ We’re trying to tap into that demand.”
