Graduate Hotels: Ben Weprin

26:57I was like, no small plans, no small plans. I was like, I'd like to buy you out of a bear. She was like, huh? He's like, where are you going to get the money? I was like, I don't know, but I'm going to figure it out. You know, I remember he said, well, why do you want to do this? And I remember telling him, I was like, Larry, what would you do? I was like, I want to be like you, right? Like, I'm not, you know, you're aspirational. You're a hero to mine. I collect your baseball card. Like, I put your poster on. Like, I want to be like you when I grow up. This is my opportunity. He's like, well, you know, it's a tough time right now.

27:24It's, it's 08, right? It's, you know, Q4. Nobody's lending. No, there's no lenders. I was like, I'm going to figure it out. He's like, all right, I'll give you 60 days. When we come back in just a moment, Ben gets a full taste of the hotel business from a failed deal at an iconic beachfront property to a smart investment in a dilapidated days in. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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30:13Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2008, and Ben's business partner, Larry Levy, has agreed to let Ben buy his shares in the luxury hotel company Aubergge, which means Ben has just a few months to come up with$8 million. $8 million. So how much cash did you have in your bank account to put in at the time? Nothing. I think I might have put in$50 ,000. And I went everywhere. Yeah. How are you going to get$8 million in 60 days in 2008 when the economy's crashing? I went to people that understood the product. I went to people that understood the brand. I went to people that they could get behind something.

30:58And just like, I had to clearly articulate my vision, but didn't charge them anything to do it. You were going to handle all of the work. I was going to do the work. And I owned a minority interest in the brand. So they're betting on somebody who owns a minority interest, no control, but was going to go to try to work hand in hand with this company to try to help them grow it during the recession. And you had to give up a lot of that equity in order to get the money. There's no way you could have raised that money and retained a majority stake. No. I was asking anyone or everyone that I thought would be interested.

31:32And I was, remember, my largest investor was a dermatologist in Dayton, Ohio. And he happened to have some cash. Very successful, incredibly close, my mom's best friend. Right. I walked him through what I was going to do, and that this was an operating business, and I was going to grow it through acquisitions and development. And I was going to be relentless, and you can't beat someone who doesn't give up. and I will kill myself before this is not successful because it was a once in a lifetime opportunity. It turns out there's once in a lifetime opportunities all the time if you put yourself in that position.

32:06But we did it and we closed. How many people ended up investing? There was 15 people. I was short a couple million dollars at the end and Larry decided to roll his equity into that. Right. And back me, which was a great vote of confidence. And when I was talking to other people, it's just Larry staying in. He believes in it. He just, you know, giving me my shot. So you basically buy – you acquire Larry's shares in the middle of a financial crisis, in the beginning of a prolonged downturn in the markets. Tell me about the vision because you're a minority stakeholder in Aubert's with a bunch of investors in your minority stake.

32:51What could you actually do with that? Nothing. I mean, I could help them grow, right? I mean, it was a good value proposition for them, right? I was a non-paid shareholder that was going to basically outsourcing their acquisitions and their development. And I was on my own dollar accord going to go run around and chase deals on their behalf. Look for hotels that were interested in maybe selling to a bearish. And that's where I really learned what made a unique, distinctive, one-of-a-kind asset, this sort of heirloom-type property that would fit within that collection. And just to be clear, just to explain to people who don't understand all the nuances of commercial real estate, when you got this group together to buy Larry's shares of a bearish, you created a separate investment group called AJ Capital, right?

33:43Correct. We had a Christmas card that had gone out that December that my wife and I sent, It said, you know, wishing everybody a happy and healthy year and an adventurous journey. And I didn't know the name of my company. And, you know, we were putting together LLC to buy the Auberge interest. And my Christmas card was like, what's the name? I hadn't even thought about it. Well, it's Adventurous Journeys. And that's how we started it. And that was it. Okay, so Adventurous Journeys now. And what's interesting to me, it seems like it's smart, right? Because on the one hand, you've got your shares in Auberge.

34:13On the other hand, you are trying to source other deals for them. as a freelancer, basically. But if you could broker a deal, you would get a commission, but you would also, AJ Capital, Adventurous Journeys, the group, would also benefit from growing Aubergh. Absolutely. And then also had worked with Larry on a hotel that he owned in Miami Beach. That's what I was working for before. I had met the group that owns the hotel across the street because they're working a beach access deal. It's a hotel called The Raleigh. iconic, you know, Esther Williams pool, romantic, sea great tree, like just unbelievable asset.

34:53And the guy who owned it, the asset manager, I called him to tell him I was starting off, you know, starting my own company and, you know, just wanted to have coffee. And he said to me, he said, you know, the Raleigh is, it's going to be for sale. And I'm like, holy cow, like, I'm going to like, this is amazing opportunity. And, you know, when you're thinking about it And during a recession and when the market is just completely stagnant, I didn't have any baggage. I was sitting there ready to go. So many interesting businesses and opportunities start in a recession. And I was like, okay, I should buy this hotel.

35:29Even though I had to act, even though I didn't have the money, the capability, but I knew that I had to act. I knew that it was an opportunity and I loved the real estate and the asset. And so I said, yeah, I'll do it. put a contract on the Raleigh. Amazing hotel. It was like 106 rooms in this spectacular space. I had this idea that I was going to bring in Rayo's in the back. The famous New York Italian restaurant that's impossible to get a reservation in. Yeah. I'd gone there, just blew my mind. I'm like, I'm going to get these guys to come in. Understanding kind of like the Ian Schrager model where, you know, or Barry Stern, like, where the food and beverage is very integral to the asset and helps tell the story.

36:09I was like, Like, Rayo's is a story. It matches. Iconic, historic, hard to get into, unique, distinctive. And so I met the guys from Rayo's. Frank Sr. and Junior Fly Down. And Frank Sr. is a legend, right? He is a real restaurant icon. He's just a character straight out of Central. He came down, he had gold, and I loved Frank. And I remember I said, Frank, what's the most important thing at a restaurant? he's like is it the food is it the service he goes nope he's like the most important thing at a restaurant is who's sitting across the table from you and i'll never forget that it was the most like impactful powerful lesson because long story short we end up buying that hotel i make a deal with frank literally like on a napkin that we wrote at macaluso's and in in miami beach for him to be the operator he's committed we spend six months working on it um you know on the plans we We went to Miami Beach Historic.

37:05I had these investors. I didn't know anything about them. I found them in Miami. They were based there. They understood the hotel. Which is basically your story. I mean, you didn't have the cash, but you had the ability to convince people that you could lead a group of investors to the promised land eventually. Yeah. They wanted to get into hospitality. and, I don't know, six months, seven months in, they called me down and said, hey, can you give a presentation on Rayos? And they knew all about Rayos. We had signed the operating agreement. Everything was going. And the guy sits me down and says, hey, we want you out of the Raleigh.

37:41And same thing with Rayos. What do you mean they want you out? They don't want me to be involved anymore. Who said this? My investors. Wait, but you got the group together. I did. What do you mean? They want to kick you out? They did not want – they wanted to take over operations. But you were still a shareholder. I mean you would still get paid. Yeah. I was a GP. They just wanted you – they didn't want you involved. You were going to get paid. They just didn't want you involved in any decision-making. Is that what you're saying? Correct. And they wanted Rayo's to go by the wayside because they wanted to take control of it and do it themselves.

38:17They thought they could do a better job than I was doing or my idea, my vision for the property didn't align with theirs. there was no turning back and i was gonna have to tell reos frank pellegrino who is a legend an icon and one of the most connected people in all of new york in terms of everyone comes into his restaurant he knows them all yeah i had to go tell him that i was getting kicked out and they wanted him out of the raleigh so i fly up there literally the same day like this happened at like 11 o 'clock in the morning because i gave this presentation and the guy sat me down it was like I was completely crestfallen.

38:54I fly up there and I go to 114th and Pleasant and I go in the back room where Frank would check the dupes and smoking cigarettes. And I can remember what it smelled and looked like. And it was like at five o 'clock before dinner service. And I sat down and I told him the whole story. I said, here's what happened. And these guys want me out. And he said, I remember, he said, Ben, I told you the most important thing at a restaurant who's across the table. And it's the same thing for a business deal. And I have your back. And you go, I go, don't worry about it. We'll be okay. We got this. We'll do something else together.

39:25And you're, you know, you're, you're family to me. And I never forgot that. And it was such a powerful lesson. And it gave me, I was really worried and obviously scared. And it gave me a lot of confidence and conviction that I could go on and keep going. And long, longer story short, I'm in Chicago trying to figure out what do we, you know, what's next, right? What's the evolution of this company? And we'd grown, we'd add some people. And like, I lived in Lincoln Park and I I'd go to this gym on Lincoln Avenue, Equinox. And every single day, I walked in front of this vacant, we used to be a days in, dilapidated hotel on the park.

40:01Great sort of just, you know, red brick, simple, great views, but had been closed down for four or five years. And people looked at it and tried to figure it out. And one day, it literally just hit me in the head. I'm like, this neighborhood, it's so special. It's so unique. It's high barrier to entry. It has zero competition. And what if we could tell the story of Lincoln Park? What if we could tell the story of why this neighborhood is special to people at a low price point? That could be a successful business proposition. Yeah. So, all right. You decided that you wanted to acquire this old Days Inn in Chicago near DePaul University.

40:42And I'm curious, I mean, is it because at that point you – I mean, at that point you didn't have any hotels that you were directly involved with? no and I didn't want to travel as much I you know I was having kids and like you know I had a business and I wanted to be in my neighborhood like it just kind of made sense and did you also did you I'm just curious did you also feel like you know this auberge thing is great but I don't really have that much power or or say in the direction of that organization I need to kind of maybe do this myself absolutely it was like you know you're you know sort of a background singer you want to be a lead singer you need to like you know grab the mic and kind of yeah and i still look i didn't have the experience and sort of urban development and especially historic renovations or repurposing i hadn't done that on the hospitality side i'd seen it adjacent but i never done it and so when i came up with this idea and this plan to you know do a story driven hotel at a low price point that was basically a second bedroom you know hotel in that community and really just thinking about myself as a customer or my parents or my mom or dad coming to see their grandkids, they didn't really care about what was happening on Michigan Avenue.

41:57They wanted to be in Lincoln Park and close to us. And so could we build a hotel that was served as that sort of second bedroom? And DePaul was relatively close. So those were kind of the drivers and I didn't have the experience to do it. Went to raise the capital. The investor matched me up with a local developer that had done a lot of renovation and construction. And I was going to be focused on the marketing, the sales, the design, and the sort of, you know, overall, you know, plan. And the idea was to really connect to the community. And we found all these interesting stories in our research and that we knew because we lived there.

42:32Like Frank Baum lived in Lincoln Park when he wrote Wizard of Oz and, you know, Abraham Lincoln, obviously with Lincoln across the street. And his bodyguard was this guy, John Parker, that was supposedly drunk when Lincoln got shot. And so we did the rooftop bar after John Parker. Yeah. The whole idea of this, of buying this, this hotel and renovating was to then have it reflect the neighborhood story, basically inside. Bingo. That's it. Take the outside inside. I mean, this was not going to be a luxury hotel. No, not at all. But it was going to be a nice hotel. Yeah, it was going to be good enough, which is a huge market, right?

43:09It's first of all, there was no competitive set or a frame of reference for people to come into and say, oh, well, I'm used to the Four Seasons or Rich Carlton or whatever. And then it was just good enough. You had to do it at a low price point because there was no comps or history. We didn't know what we were going to be doing. Instead, you're inventing a new product and putting it into the universe. You have no idea how it's going to get absorbed. And lenders, investors, everybody looks backwards and says, well, this is what's here. And the only basis is sort of the price per square foot or just what you're paying in terms of replacement cost.

43:40And so we had to do it on a really tight budget. And I'm curious, I mean, why did you think there was an opportunity to buy this dilapidated days in there? Like, I mean, who was going to stay there? I thought my parents would stay there. Yeah. I thought DePaul parents, you know, parents visit, there's a lot of young people that lived in Lincoln Park. I thought we'd get business from the Cubs, but it was one of one. And that's the really, to me, that was a really, you know, sort of light bulb moment was like, There's no competitive set here, and that's a great business. So you get this hotel, and the idea is let's get a renovated first, right?

44:16And by the way, what was the price of the hotel? Like under$6,$7 million or more? No, it was more than that. I really don't remember. But again, you had to get a group of investors to buy it. You could not buy this. So that was the first deal that I did with a real institutional firm. Did it with Angelo Gordon, which is like an investment firm. And they paired me up. Actually, the guy that was in charge, Keith Barquette, his brother, was a developer in Chicago and did a lot of historic renovation and development. And Keith said, I'll do this deal with you, but you got to work with my brother who's, you know, a construction expert.

44:46Got it. So that's how that ended up working with both of them. That was, look, I mean, all of these deals, there's such building blocks to, you know, you just got to do deals and build a, you know, build a skill set. Yeah. Okay. So you're going to renovate this hotel, but you want to, I mean, you want to have a good restaurant in there. You want to have a coffee bar and you want it all to kind of reflect the neighborhood. So you were going to have like posters and art and memorabilia in the hotel? Absolutely. It was going to basically wanted it to feel like my apartment in Chicago. And the food and beverage was going to get local people to come in and see it and say, wow.

45:22Yeah. And then we built this rooftop bar that overlooked, that was magnificent, still is, that overlooked Lincoln Park, that looked downtown, that had great Lake Michigan views. And people came here and said, holy cow. Like, this has just been sitting here in plain day sight. I can't believe that this exists. And they got excited about it. So how did the hotel do? I mean, was it successful right away? Crushed. Right away? Right away. I mean, people came into the restaurant and the hotel, and it just caught kind of lightning in a bottle. And you can't plan for that. It just happens or it doesn't.

45:58And it worked immediately. And you called it Hotel Lincoln. Yeah, which was the original name, which we brought back. And inside the hotel, like in the lobby, you would see like references to the people and the things that are around there, like Abraham Lincoln, as you mentioned, David Mamet, the playwright. Who else? What else? What are the kinds of things were in there? The zoo. I mean, we had a giant, you know, tiger, porcelain tiger, you know, that was across the street. We had all these animals. We had a giant, huge wall that we went and bought cheap flea market art to cover it as a gallery wall, which has been a trademark ever since.

46:35We just made it feel warm and comfortable. So, all right. Now, this is your hotel. Yeah, this is it. I live down the street. Yeah. Developed it. Own it. Super proud. Grateful. Loved every bit of it. Right? And then I was like, well, find problem, fix problem. That's what we did. We found the problem. There wasn't product that matched the market. We fixed it by building this asset. And we built some trust because we executed, we delivered. Now let's scale. So you had a playbook now. Find the investors. Now, every time you had a success, it was probably easier. Probably you had people coming to you and saying, hey, I want in on your next deal.

47:19For sure. We're starting to build a team of people that were very passionate about hospitality. And so we're saying we could do these sort of design-driven hotels in neighborhoods within Chicago that we really understand real estate is so block by block. Yeah. And building by building. And so I identified four neighborhoods in Chicago. We've done Lincoln Park. We wanted to do Gold Coast, CBD, kind of Michigan Avenue, and then West Loop. And we ended up doing four separate hotels, all historic renovations. And where can we take that on the road? and how can we combine all these things that we've done and which deal was really the most successful?

47:53And it was, without a question, Hotel Lincoln. That was the one that really stood out. And you're thinking, how can we replicate this? How can we get our model? That was it. So where did you start looking? Yeah, we thought neighborhood hotels close to a university. That was it. There wasn't any science behind it. It was all art. But you thought university because you saw the success of the Lincoln Hotel near DePaul. A lot of the business was connected to university. The university is a great driver outside of parents. There's professors coming in or prospective students or alumni or camps or all these things that are happening.

48:29And so we thought that was an interesting business model that had been overlooked, particularly in Chicago and New York. So we started looking in New York. We went up by Columbia, went down by NYU, and the pricing was just – there was no way to do what we wanted to do. New York's too competitive a market. We started looking in L.A. around Westwood and USC. and we just couldn't find anything. Started, you know, just kept going further and further in terms of markets. And we were starting to look at a deal in Oxford, Mississippi at Ole Miss. So I was looking at that one. And then one day a guy in my office, and we were super small, he said, well, look in Ann Arbor.

49:04You know, I told you I'm a Buckeye. I don't even go to Ann Arbor. Like Michigan, that's like the worst. I reluctantly go up there. You know, it's not that far from Chicago. And I go to Ann Arbor and I really don't want to like it, right? I mean, my family's Buckeyes. Like, you got to understand the yin and yang here. And then I start walking around Ann Arbor. I don't want to like it, but I love it. And it has all the character and the charm and the history. And the university markets are just so inspirational. And it's contagious, the energy, the optimism, right? The youthful exuberance. And I'm like, this is awesome.

49:38And so I went back and started literally was like, without any research, without any diligence. I was like, we should start a college. We should do Ann Arbor and Oxford, and we should start a college brand. So just by circumstance, somebody says, go look at Ann Arbor. But up until that point, you weren't thinking, hey, let's build a brand of hotels in college towns. That was not the plan quite yet. It had never even crossed my mind to build a brand. You were a - Developer. A developer, yeah. Yeah. Never even thought about building my own brand. But then when something didn't, And it was like, this was the Sunday.

50:15This was like we could put all the stuff that we've been doing together collectively into one really unique package. The connecting all of these dots, all of this, the idea that it's hard barrier to entry, it's hard to get into, it's unique, it's distinctive. It's the idea that people take very passionate ownership of where they went to school or where they're from and the hotel product was terrible and no one had done it. I was like, why anybody done it? Why hadn't somebody built a brand? There's all these brands around whatever it is, but nothing around university nostalgia. Why anybody done it?

50:50I figured out pretty quickly, it's hard. Easy to say, hard to do. But that's actually a great recipe for a new business too. When we come back in just a moment, how Ben begins to build hotels in Tempe, Oxford, Ann Arbor, and many other college towns until COVID stops everything in its tracks. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

51:30Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2014, and Ben realizes that the hotel he's just renovated near DePaul University in Chicago could be replicated in college towns across the U.S. But now he needs a name for it. And during a brainstorming session... We were kind of spitballing, throwing names against the wall. And we were thinking of other academic, but also what is inspiring. and the idea of a graduate, of somebody that you graduate, and our motto is we are all students. The idea that you continue to learn and grow and evolve and you never really graduate. And it was a great sort of play on words.

52:10And it's sort of, again, aspirational. Like you could be the graduate, you could stay there. It's not super expensive, right? It's affordable, but it's sort of a little bit of upscale compared to what might have been available in the town. Totally. And we were going to become vertically integrated. We're going to own the hotel. We were going to operate the hotel. And we were going to brand the hotel. So we controlled the full customer journey and experience. Everything that a customer would touch, see, feel would come through the DNA of graduate. So when you started to talk to investors about this idea, now, by this point, you had a track record in Chicago.

52:52So it's a different conversation. But in general, I imagine people would say, well, what happens in the summertime when these places are dead? So in these markets, there was a high alumni interaction and connectivity. And not only were they coming back to the schools with reunions, there was camps. There was weddings. There was – we coined the term visitcation where people would come with their students, prospective students, and to look at a school. There was art crawls. There was so much going on in these culturally rich inspirational markets in the summer that we were way busier in the summer than we were in the winter.

53:26So the first one opens up in the fall of 2014. This is in Arizona, in Tempe, near ASU, Arizona State. And then soon after, you opened one in Athens, Georgia. I'm imagining you were very involved in the design and the sort of the aesthetic of what that first one would look like because it had to be great. Had to be great. Had to be important. Had to tell the story. And so, yeah, I was absolutely involved. And we brought in in-house design and a whole team of people that had this mission-driven approach to hospitality. and i remember we do our model room review because we had tempe and athens and oxford and they set everything up and we were going to go in you know model room is when you build the room you know that you're going to do throughout the entire hotel and i had you know walked through and the first one i saw was oxford and there was this giant painting on the wall it was a red solo cup and i walked in and i was like that is awful take that down like we're we're like some fraternity party you guys were we're a high touch point bespoke you know adult driven hotel like we we've got to be more like the hotel and just reflect the neighborhood not you know solo cups yeah i was just grossed out by the whole thing and then you know we build that hotel we did oxford we did athens i don't know year two years later i remember seeing that solo cup painting in my office or not in my office, in our warehouse.

54:58You can imagine the stuff that we have in there. And I saw it in that hotel in Arizona. It didn't catch particularly like Athens or Oxford. And I remember thinking to myself, I'm like, we're actually the solo cup, right? We were taking ourselves too seriously, or I was taking it too seriously. They actually, they knew. And I wanted to be something that we weren't. And really understanding at that moment, we just had to reflect what was there. The idea, the nostalgia, the visceral, limber connection you have to college, the late nights, the ordering pizzas, like all those things, that was actually how we were going to tell the story.

55:34And so we started really getting into the idea of having conversations. We built this writer's table and we would take alumni from all these different generations from the schools that we were building or doing a project in. And we just had dialogue and conversations, old school. And we would talk. And these projects take 12, 24, 36 months, particularly doing an adaptive reuse or reposition. So you have time to really submerge yourself in the culture and find out what are the stories? What is the history? What did you love about college? What made it unique for you to go to Princeton? What made it unique for you to go to Palo Alto, Providence?

56:09What we would do is once we would get all of these pieces, we would find sort of a central character that we were gonna base the design and the story off of. An imagined character. Imagined or real. You basically have a profile of a person that would be the main mascot? Exactly. They would be the mascot when we were designing the hotel. So talking about Chapel Hill, it was Michael Jordan. We did Nashville, it was Dolly Parton. We did Knoxville, it was Peyton. We just finished Auburn, it was Bo Jackson. We were thinking about pop cultural references and the things that were consistent across many different generations within the school.

56:46and we would implement it into the furniture, into the carpet, into the story, into the design. Just the design of each one was completely different? Completely different. Which is very inefficient, right? Incredibly inefficient. That's the complete opposite of a large-scale chain hotel. Yeah. They sort of decommoditized the whole thing. We wanted to do, or what we did was turn that upside down and say, you know, could we make, you know, the challenge as you grew bigger was to think smaller and find more stories and more history and more nostalgia and create, you know, we get this term nostalgia.

57:26You create a new memory in an old place that you'd already been that felt familiar. So it had to be familiar, like a new familiar in a new way. So if you'll indulge me for a moment, can you walk me through the process of like one example? Like, I don't know, maybe can you take like Eugene, Oregon, for example, which is where the University of Oregon is. And I'll just describe the lobby has a giant wooden duck in there. And there's a bunch of it looks like a shoe store, like Nike shoes, like vintage Nike shoes. Just walk me through how like who did you bring to the table? What did you do? How did you implement that in the design?

58:03I'm glad you picked Eugene. It's one of my favorite assets and markets. And the central character was Phil Knight, Steve Prefontaine. The great runner who sadly passed away as a young man, but kept. And Nike as a company started there, right? Bill Bowerman was the coach. Phil Knight was a student or was an athlete. And then Nike came and it was Phil Knight said, you know, it's like, don't stop till you get there and don't give any thought to where there is. And St. Louis Fontaine changed the idea of what people thought was possible. And so we had to invoke that energy, that optimism, that spirit, the idea that anybody can do anything if they set their mind to it.

58:43And Nike as a metaphor for that, as that vision and the track and field, which is the, you know, they're most synonymous with and the colors and the mountains. I mean, it's an absolutely beautiful campus that's, you know, submerged in the woodlands. And, you know, Eugene is a beautiful city. It's kind of weird and quirky and distinctive. And so we had to really get into that. We talked to a lot of alumni. We spent a bunch of time up there. It was an existing hotel with a lot of rooms. So how can we make that feel smaller and more intimate and really connect to the school? And so, you know, the front desk is a vintage shoe store.

59:18Yeah, it has, you know, I bought them myself. It made perfect sense and it was fun and interesting and told a story as soon as you walked up. And so that was the story that we wove throughout the entire thing. and what that mission meant to so many different people. And the whole idea of just inspiring other people to chase their dreams. I guess, you know, did you, I mean, did you, so as you started to build these out, what was the response? I mean, on the one hand, I would think that the towns and the communities were really supportive of this. Was there ever any resistance? Were people ever like, what is this corporate Chicago company doing, trying to like wedge into our community?

59:59Yeah, there was people that were reluctant. But when you own the asset and you do exactly what you say you're going to do, time and time again, you build that trust and that goodwill. And it took a little bit of time. A brand is not overnight. You really have to build credibility and authority to come into a market and show people what you've done in other places by executing their vision on a very specific level, a very specific magnifying glass. And they come through and say, these people cared. We had to connect to all of them and make them buy in to the mission. So, I mean, this is sort of a march of growth from 2013 up until today, but there's a huge speed bump along the way, which was COVID.

1:00:48All of a sudden, universities empty out hotels. I mean, I stayed in some hotels during COVID, and it was really unpleasant. And, you know, everyone's wearing masks and there's, you know, wet, not wet wipes, you know, I mean, like, like sanitizer everywhere and the room service is shut down. And it really was not fun to stay in a hotel during COVID. How did that impact the business? I mean, it must have been very significant. We really started, you know, in 2016 was our first kind of like we had a couple hotels. We did about$30 million in revenue. In 2020, we had 4 ,600 rooms and the portfolio did$72 million.

1:01:29We opened 15 hotels. We had another 15, 17 under development. Yep. We went to zero. Wow. Everything stopped. We had 2 ,200 employees. I thought someone was playing a joke. That wouldn't happen. I really did. I thought it was like someone was like AI simulation. And, you know, this is how hard could something be? Everything was in front of us. The business was ramping. We had this great niche. We figured out our cadence, how to do this and tell the story and go into these markets. The brand had really caught in and it just went to zero and it was illegal to travel. And, you know, operating businesses are not designed to do zero.

1:02:11And, you know, we didn't know what to do, right? We were like, okay, one thing we have to do is continue our show, our commitment, our conviction, our dedication to these markets. They don't want them to think that we're this out-of-town investment firm. It doesn't matter. So what can we do? We can open up the doors and let in first responders. We can open up the doors and let students who are stuck stay in the campus. Whatever we could do. We had a skeleton crew. We would have the general manager at these hotels. We had almost a half of them that were under development. and we were just trying to stay alive.

1:02:46Presumably, there were a lot of layoffs for starters. It had to be. Yeah, corporate, we had a lot of layoffs. The property levels, we had a massive amount of layoffs. I think we laid off 2 ,000 people out of the, I think, 2 ,200 at the time. So, I mean, basically within a year, I mean, 2020 was sort of the disaster. Did you start to see it turn around by the end of that year or was it really well into 2021? Well into 2021. All the states had different rules, obviously, coming back. But really well into 21. In 2022, we started to see a spike, a real spike, in terms of people coming back. And you had high school kids that had never gone, that were college-bound and never visited a school.

1:03:31So we had a massive amount of parents and students coming to looking at schools and evaluating where are they going to spend the next four years of their life. We had people that were in school that had never even been there. They enrolled, you know, to Chapel Hill and had never even been to the campus, you know, or pick your university. And so they came back in droves and, you know, we were, you know, obviously ready and welcome and excited to receive. And we'd also shown our commitment to these markets by not going anywhere. And this was actually, you know, why we ended up selling Graduate was we took a, you know, very large expensive loan out during COVID to, you know, continue to deliver the projects, continue to pay our mortgages.

1:04:11And we made it through. We got out. Sometimes you got to do what you don't want to do so you can continue to do what you do want to do. And thought that if we sold the brand, that we would survive and live to see another day and really enhance the property level investments. And so that's when I called Chris Nassetta, who is an incredible CEO and leader and runs Hilton. And Chris had told me when I started, we started the brand and said, hey if you ever you know i think this is really unique we i've never bought a brand while i've been the ceo for 15 or 20 years but if i did it would be graduate and so called chris hilton you called hilton wait chris at hilton you said we're we're ready to talk about maybe selling the brand yeah was it it was a solution i mean it was a solution to paying off the expensive capital that we had taken to survive COVID.

1:05:06And it would enhance the value at the property level by affiliating with Hilton. You know, our biggest sort of, you know, challengers in these markets, people that are not just product-driven are people that are affiliated with, you know, have brand loyalty and collect points, which makes perfect sense. And so we said, look, we can affiliate and be part of their distribution and revenue management and their network that we would increase our overall occupancy and our overall performance to property level. And that was the business plan. So essentially by doing that deal, like had you, I mean, the deal with Hilton and I'll just say, it was closed in March of 2024.

1:05:43They paid over$200 million just to acquire the rights to the brand. Like you kept the properties, you own the buildings. So you are the landlord, right? And you also operate the hotels. So essentially hilton bought the name graduate and and sort of the brand aesthetic hilton can now hilton owns the brand yeah they can now franchise and grow that brand through their network through their owners all over the world and it's part of their system now not not part of ours it's hard for me to say that out loud but it's it is what it is yeah i mean it's an incredible deal because I mean, you got, you know, you still retain all the assets, right?

1:06:32And you essentially hand over your brand Bible, which is really valuable. Obviously, they put a high price on it,$210 million. Had you not done that deal, I mean, would it have been harder for you to expand Graduate out on your own just because you still had to catch up from the losses of COVID? you could have lost the whole thing you could have lost a whole thing even though it was it was you know profitable and wasn't it wasn't an operational or a profitable issue it was a capital and a timing issue and that's the nature of your business which is it's a business where you can actually buy things without having any money because you can just find the people who have the money but then it requires loans and that's and then once you once you buy a property this clock starts ticking.

1:07:21Right. And it's going to, at some point it's the timing has to be perfect because you're going to have to pay back the loan or sell the property and everything has to happen in the right way in your business. Yeah. I mean, there, you know, if there wasn't COVID, if there was, we wouldn't be having, we'd be talking about us selling the entire portfolio, you know, over a$2 billion portfolio of real estate. That'd be the conversation, you know, and the brand or maybe keeping it. I don't know. But that's, you know, you have to make these decisions as a real estate, you know, developer and investor and they're cyclical and things change.

1:07:56And it's like, you know, I asked for all this. I was ready, willing and able to accept it, but also to keep moving forward with, you know, passion and energy and conviction, because that's actually transferable, that energy, it's contagious. And I believe in what we're doing and now we've done it. So when you think about the journey you've taken, the path you ended up on and you're still on it, how much of it do you attribute to the work you put in and the grind, and how much do you think it has to do with luck and timing? 99 % luck. It's luck. Yeah, you have to take the lottery ticket. You still got to go to the store and cash it.

1:08:30So you have to have some awareness and you want to connect dots. And it's just luck. It's like I'm lucky to have my parents, my brother. I was just lucky. Like, I was lucky to be born where I was. The luckiest thing that ever happened to me was meeting my wife and convincing her to marry me. That was luck without her. Zero. You know, I'm probably back at, you know, just for feet selling shoes. And so that's luck. I mean, that's lucky. That's Ben Weprin, founder of Graduate Hotels and AJ Capital Partners. By the way, under Hilton's management, Graduate is still opening new properties, the latest in Princeton, New Jersey.

1:09:08It has a giant Gothic-style reading room with those old-fashioned Chesterfield couches and two massive tiers of books. In fact, recently, someone was in there reading a copy of War and Peace, which I assume means they're going to be staying for a long time. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at GuyRoz.com.

1:09:44This episode was produced by Devin Schwartz with music composed by Ramteen Ereblewey. It was edited by Neva Grant with research assistance from Catherine Seifer. Our engineers were Robert Rodriguez and James Willits. Our production staff also includes Alex Chung, Carla Estevez, JC Howard, Sam Paulson, Chris Messini, Carrie Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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