Jim Merkel, president and CEO of Rockbridge, a private equity firm that invests in hotels, doesn’t spend much time looking backward.
“We know that we’re only as good as our last investment, and so we have to continue to evolve and deploy capital effectively,” Merkel says.
The company’s DNA is built on understanding how to structure a good deal, what to look for and who to partner with, but Merkel and others at Rockbridge are determined to avoid complacency.
“As you grow and you go through different growth spurts, you experience different challenges. And our focus has always been to be forward thinking — to look forward and remain relevant to the market,” he says. “Change is constant, and so if you’re not changing as an organization, you’re getting left behind.”
Balancing an ability to look forward while keeping the skills sharp that allowed the firm to grow is central to Rockbridge’s success, as it acquires hotels, creates value by either repositioning them or fixing what’s broken, stabilizing the investments and then selling them.
This formula has created an excellent track record with investors.
Over the life of the firm, Rockbridge has invested $5.5 billion in hotel assets. Of the more than 260 investments, 95 percent have had a 10 percent return or better.
Currently, the company and its more than 70 employees have $1.6 billion in assets under management.
Here’s how Merkel and Rockbridge are continuing to evolve and innovate by looking at a lot and doing a little.
Training top talent
Companies are not just defined by what they do in a crisis, but also by what they did before the difficult period.
Merkel says there isn’t a real estate company in existence today that didn’t experience significant challenges during the recession, including in the hotel space.
“It’s almost surreal to look back to 2009, and think (back to) the thoughts that we had of whether our banking system was going to make it through, and whether our cash was safe in the banks,” he says.
Rockbridge scraped through the global financial crisis without losing a single asset and being cash flow positive throughout because of the foundation it had already built.
Merkel says it’s difficult to find people that you can just plug-and-play to manage Rockbridge’s niche investments.
So, early on, the company determined it was going to hire the very best people — “A” athletes who were successful in whatever they did — and then train them in the business, which he says proved to be a very good decision when the firm met some headwinds.
“It put us in a position where, when we went through the downturn, we had everybody on the same page,” Merkel says. “We had people that were rolling up their sleeves, doing whatever it would take.”
He believes when you hire, the most important things to focus on are character, work ethic and cultural fit.