Having major investments in hotels, office buildings and co-working operations might seem like a bad idea during the Covid-19 pandemic, but Raoul Thomas and his ability to analyze deals have turned this into a growth strategy for CGI Merchant Group.
The Miami-based company formed a $650 million hospitality fund, with investors including former baseball star Alex Rodriguez, to purchase hotels under the Hilton brand, many of them in distress. It’s looking to buy more offices in suburban markets, where its Nexus Workspaces coworking brand is attracting clients who no longer want to work in crowded city centers.
“Because of my investment banking experience, it allows me to see value where others may see struggle,” Thomas said. “I had the foresight to believe in Nexus and to buy a hotel at 11th Street and Biscayne in 2014 – at a time when you wouldn’t want to walk behind there. I knew Miami Worldcenter and the Signature Bridge were coming.”
Thomas was born in Jamaica; his father a well-known economist and academic, and his mother very creative and charitable. Because of his father’s job, Thomas moved among many countries in Africa and South America as a child.
“I remember my father speaking in a room about complex economic issues as a 10-year-old child, hearing that passion around everything he did,” Thomas said. “I was a nomad for many years until I settled in South Florida.”
After graduating from the University of the West Indies, Thomas was hired by the Florida Department of Financial Regulation as an examiner of international banks. He then worked in capital markets analyzing deals for Barclays Capital, led investment banking in the Caribbean for Royal Bank of Canada, and managed investments for Michael Lee-Chin, a self-made billionaire who was also born in Jamaica. Seeing that Lee-Chin could build a financial empire from scratch, Thomas decided it was time to realize his own ambitions.
“I knew very early on I would start my own company,” Thomas said. “It’s better to take a risk on yourself. You could do a great job for a large company, and then they move their headquarters to London and you’re out of a job.”
Thomas founded CGI Merchant Group in 2006. Using his experience as an investment banker, he approached investors with an analytical approach to making real estate deals.
“You have to have thick skin and be resilient because many people say ‘no,’” Thomas said. “You must tell a true and compelling story with all the facts, and repeat it over and over.”
One of the stories Thomas is telling now is about the opportunities in the hospitality market as the world deals with Covid-19. CGI Merchant Group owns the Gabriel Miami hotel, and it could add 20 more in North America and the Caribbean through the fund it established with Hilton.
There are many hotels in great locations that are struggling because of travel declines related to the pandemic. Thomas said the fund will recapitalize the hotels and brand them with Hilton to carry them until the travel market recovers.
“This is a generational opportunity where assets will trade at a discount from 2019 prices,” he said. “We are being very conservative on the recovery timeline, expecting to get back to 2019 levels of occupancy and average daily rate in 2024 or 2025.”
The hotel fund has created an opportunity for Thomas to engage with Caribbean nations. He looks forward to helping the economies of island nations recover by reinvesting in hotels and hiring locals.
“I can bring the world’s largest hotel chain to these islands when their economies are so dependent on tourism,” Thomas said. “I never envisioned my firm would be in a position to have that impact, but we are sitting here with these opportunities to take a leadership role.”
In the office market, CGI Merchant Group has acquired 550 Biltmore Way and 55 Miracle Mile in Coral Gables, 3480 Main Highway in Miami’s Coconut Grove, and a portfolio of suburban offices in Palm Beach and Martin counties occupied by its Nexus Workspaces. The company uses an executive suite model – not large, open rooms – so it’s easy for workers to have private spaces during the pandemic.
Thomas started Nexus in 2014 because he realized operating an office was about more than charging rent. The executive suites can charge for such amenities as web design, business services and deliveries. It also helps that they are low-rise buildings with few shared spaces. He plans to add more buildings in suburban markets to the Nexus portfolio this year.
“People want to work closer to home. And because of the pandemic, this will be a big thrust moving forward,” Thomas said. “Some people say I had a crystal ball.”
Source: South Florida Business Journal