November 5, 2025 • 28 mins
A foundation in hospitality can teach lessons that last a lifetime — especially when it comes to building businesses rooted in people and purpose. In this episode of Founders' Forum, co-hosted by Armon Vincent, Founding Partner of Catalyst Technology Partners, Gray Brandeis, Founder and CEO of Scholar Hotels LLC, shares how his background in hospitality has shaped his approach to building authentic, human-centered brands.
Gray opens up about the lessons learned from years of serving people face-to-face — and how those same principles of empathy, trust, and experience design now guide his work helping founders elevate their businesses. From client relationships to leadership philosophies, Gray shows that success isn’t just about numbers — it’s about connection.
Key takeaways:
- How hospitality experience can create a strong foundation for entrepreneurship
- The importance of empathy and genuine connection in business growth
- Why founders should prioritize brand experience as much as product or service quality
- Practical ways to build long-term relationships that drive customer loyalty
With grounded insights and relatable stories, Gray reminds us that people remember how you make them feel — and that’s what builds lasting brands.
About Gary Steven Brandeis:
Gary is the CEO and Co-Founder of Scholar Hotels LLC. He began his real estate career in 1990, and his experience and expertise include development, finance, acquisitions, dispositions, asset management, and joint ventures. He has been the principal partner in four real estate investment funds, including PB Funds I & II, investing over $350 million across all property types and investment strategies since 2005.
Connect with Gary:
Website scholarhotels.com
LinkedIn linkedin.com/in/garybrandeis/
This episode is brought to you by Gehman Design Remodeling; Design, Concept, and Construction for stress free remodels. Go to gehmanremodeling.com to learn more.
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Episode Transcript
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Announcer (00:00):
The following programming is sponsored by Marc
J.
Bernstein.
The views expressed do notnecessarily reflect the views of
this station, its management,or Beasley Media Group.
Entrepreneur, founder, author,and financial advisor Marc
Bernstein helps high-performingbusiness owners turn their
visions into reality.
Through his innovative work andthe forward-focused forum, Marc
(00:20):
connects entrepreneurs toresources that fuel their
success.
Founders Forum is a radio showand podcast where entrepreneurs
share their journeys, revealingthe lessons they've learned and
the stories behind theirsuccess.
Join Marc and his guests for amix of inspiration, valuable
insights, and a little fun.
Now let's dive in.
Marc Bernstein (00:40):
Good morning, America.
How are you today?
It's another uh gloomy, rainyday, spring day in Philadelphia,
but we're happy inside thestudio here at WWDB.
And uh and you may be listeningto us on podcast.
And wherever you are, hopeyou're having a great day.
We're in the studio today withArmon, who was a guest on our
(01:04):
last show, who's serving asco-host of this show, and Gary,
and I will formally introduceboth of them in a little bit,
but we always start with a topicof the day, and I was thinking
this morning about questionsbecause I've been, you know,
whatever you whatever you do inbusiness, the questions you ask
are important, especially ifyou're in sales, but any any any
(01:27):
kind of people to peoplebusiness uh questions are very
important.
And I've been working a lot onthe last few years in terms of
thinking about powerfulquestions like how do you really
get to know somebody.
Um there's a there's a book byDavid Brooks that's out now, and
I think it's uh calledsomething like how do you really
get to know someone orsomething like that.
(01:48):
He's a journalist and he's acommentator on on television and
and it's uh it's a veryinteresting book and he talks
about the questions he asks.
So my quest my question for ourguests today is what is your
favorite question?
So I'll start with you, Armon,because I know you have one.
Armon Vincent (02:10):
So whenever I'm speaking to a client, a
prospect, mm, the first questionI really lean on is what
matters most within the contextof what we're discussing, uh, of
course.
But once they give me ananswer, then I use the standard
five Y's to dig in deeper andthey give me an answer, and I
(02:31):
you know try and go as far intothat as I possibly can until I
get to really what I think isthe the the the kernel of truth
or the pea underneath themattresses, if you will, to to
really understand how theperson's truly thinking about
something.
Marc Bernstein (02:47):
Do you ever get lost counting the whys?
Because I know I've got to dothat.
You know, it's a really goodconversation, you can get lost.
Yeah, absolutely.
But I I love that question.
Um and also if you get reallydeep, we we've talked about this
a little bit because um thelast show we talked about
boundaries.
And the problem with the whys,especially in a business
(03:09):
context, is you can start totread on boundaries when you do
that.
Armon Vincent (03:12):
Aaron Ross Powell Absolutely.
It can cross over into thepersonal, and you have to try
and uh artfully arrange it sothat doesn't happen and kind of
uh you know pull up, if youwill.
Gotcha.
So that's just an observation.
Marc Bernstein (03:24):
Gary, how about you?
Gary Brandeis (03:26):
That's a it's a great one.
And I think it's an interestingone to ask yourself.
I think for me, it's I'm notnecessarily in sales, so I'm not
trying to sell when I meet withpeople or I uh I'm connecting
with people.
I think my my biggest questionis what motivates you?
And a lot of people phrase itto me as like, what gets you out
of bed in the morning?
Right.
You know, why do you do whatyou do and what motivates you to
(03:47):
be either successful ormotivates you to get things done
that day?
And and to me, that's a deepquestion.
You can you can really probeinto somebody's history, you can
probe into somebody's you knowinner inner feelings and and and
things like that.
So to me, whenever when someonewhen er when anyone asks me
that question, it always givesme a good opportunity to explain
(04:08):
sort of my perspective onthings.
And so I I like answering thatquestion.
Marc Bernstein (04:12):
So what matters most and what motivates you?
Two very powerful questions, Ithink.
You know, I think those arereally good choices.
Um mine, and I've usedsomething like those as well,
but one of my favorite questionsthat I don't always remember to
ask, but I'm trying to rememberto do it, is after a series of
questions and after a wholeconversation, what other
(04:36):
question didn't I ask that Ishould have asked you?
You let them provide me with aquestion.
And I often get one.
And uh and when I don't, itmeans that we probably had a
pretty complete conversation.
So I like that one as well.
Um so we have Armon VincentArmon Vincent, did it again, who
(04:57):
is a um he is uh foundingpartner of Catalyst Technology
Partners, and please listen tohis podcast if you haven't
already.
And we have Grant GaryBrandeis, who is our guest
today, and he's CEO of ScholarHotels LLC.
Uh he started his real estatecareer in 1990, and his
(05:18):
experience and expertiseincludes development, finance,
acquisitions, dispositions,asset management, and joint
ventures.
He's been the principal partnerin four real estate investment
funds, including PB funds oneand two, investing over $350
million in all property typesand investment strategies since
2005.
So welcome, Gary.
(05:38):
Thank you, Marc.
So as I always like to start,tell me about how you because
you have a f a financebackground, right?
Trevor Burrus, Jr.
Gary Brandeis (05:47):
Accounting.
So I decided that accountingwas uh uh the best sort of
college education I could get.
Wasn't necessarily sure surewhat I wanted to do with my life
when I started college, but Iknew that I was going to be in
some sort of business.
And um, you know, people kepttelling me accounting is the
language of business.
So so learn accounting and youcan do lots of different things
from that.
And it was actually a reallygood choice for me.
Marc Bernstein (06:08):
Right.
Yeah.
And what were your what wereyour first but you had some jobs
outside of straight accountingpretty early on, I think, too.
Trevor Burrus, Jr.
Gary Brandeis (06:15):
Yeah.
So I I I started working when Iwas I was a young teenager.
Uh I was fortunate that mygrandparents had a home in in
Atlantic City, so I got to spendthe summers with them as a
teenager working at various uhnot so great restaurants uh on
the boardwalk in Atlantic City,you know, pizza shops, ice cream
(06:35):
stands, all you could eat,smorgasboards, and things like
that.
So I think I I got my firstwork experiences as a pot
washer, uh busboy, a uh uh ashort order cook, and things
like that.
And it's funny how my careercircled back to hospitality, but
that's really where I started.
Uh you know, I made a I made uhthe minimum wage at the time
and and worked really hard, butbut got some good experience.
Marc Bernstein (06:58):
So and you mentioned just a little while
ago you worked for a uh radiostation uh or was a spot.
Gary Brandeis (07:07):
Well I had the opportunity to.
Marc Bernstein (07:08):
I had the opportunity to, yeah.
Gary Brandeis (07:10):
I chose not I I chose to stay in the real estate
business, which which may havebeen a good decision or not so
good decision, depending on howyou look at it.
Marc Bernstein (07:16):
Trevor Burrus, so how did you get from
accounting to entrepreneur,which is really the story?
Trevor Burrus, Jr.
Gary Brandeis (07:20):
So I I I graduated from Penn State with
an accounting degree and and andhad the opportunity to work at
one of the big accounting firms,global accounting firms.
There were eight at the time,now there's four.
But I worked for one of theeight.
Price Waterhouse was the one Iworked for.
And the great thing aboutstarting in public accounting is
you know, you're a you're aclient-based service provider.
So in the two and a half yearsI was there, I got to see all
(07:43):
types of industries.
So we I was doing accounting,auditing, and tax work for
manufacturing clients, realestate clients, banking clients,
technology clients.
You know, so I I got to seeprobably six or seven different
types of industries where I mayhave been there for a few weeks
or maybe even a few months,depending on the size of the
client.
So after my two and a halfyears or so at Price Waterhouse,
(08:03):
I really sort of looked at thegamut of different industries I
got to work in, and real estateof all of them really resonated
with me the most.
And it made sense to me.
Uh I liked the people that werein that business that I got to
interact with, and so Igravitated toward that industry.
And I think the reason itresonated with me was really
twofold.
One, it was relatively easy tounderstand, right?
(08:24):
You collect rents from somebodyuh and then you pay your bills
and you have a profit or notafterwards.
And that was the second thing,right?
So it was a physical business,right?
It wasn't software ortechnology or banking, which is
somewhat abstract, right?
No, you can touch money, butbut you get f pretty far away
from that physical contact asyou get into banking.
(08:45):
So for me, I love the idea ofuh of a financial-oriented
business, but a physical assetbusiness.
And I like those thingscombined together.
Right.
And that's really what sort ofdrove me to that part of the
business or that industry.
Marc Bernstein (09:00):
So you started getting into real estate within
PWC, I guess.
Gary Brandeis (09:03):
Well, so I started to get more real estate
clients because I asked forthem.
Yep.
And so I was doing accountingand auditing and tax work for
some of the bigger real estatecompanies here in Philadelphia,
because I was in thePhiladelphia office of PW and um
got to see some of the peoplewho are.
Marc Bernstein (09:18):
I keep saying PWC.
No C.
Right, right.
Gary Brandeis (09:20):
Yeah.
Uh so so I really liked it.
And then and then after Ipassed the CPA exam and had my
required work experience, Idecided that I wanted to go into
the real estate business and uhended up getting a great
opportunity to move to theWashington, D.C.
area and and took a job as acontroller and a real estate
developer and really startedfrom the ground up.
So I was doing propertymanagement accounting,
(09:41):
construction accounting, uh, andthings like that.
You know, not very glamorous,not very exciting, but but I
would tell you now as I lookback on that, it gave me an
amazing base of knowledge.
Right.
You know, if you can do theaccounting for a construction
project or do the accounting onthe management of of office
buildings and industrialwarehouse buildings, you really
(10:01):
understand the business from theground up.
And I think that was reallyimportant for you.
Marc Bernstein (10:05):
Well, and I I think with what you're doing
today, numbers and tracking youruh you know, occupancy and all
that kind of stuff and thefinancials are extremely
important, I would think.
Trevor Burrus, Jr.
Gary Brandeis (10:14):
It's it's it's really important, right?
Um I mean I I what I say aboutour company is you know, our
first job is to make a profit,right?
We're not a non-for-profit,we're not a charity, right?
So our business is to makemoney for for our investor
partners to make sure we can payour mortgage and and we can we
can you know have a profitablebusiness, right?
And so withn without a profit,we don't have a business.
(10:35):
So my first job is to make aprofit and provide a good return
for our investor partners.
My second job is to reinvest inour physical assets of the
building and our people and andmaking sure that our buildings
are well maintained or clean,they operate properly, and our
guests can have a goodexperience in the physical
building.
And then if I can do that, thenoutside of investing our
(10:55):
profits and and and cash intothe building and our people, if
if we have something left overafter that, then we can be a
great community partner, right?
We can invest in our community,we can sponsor charities, we
can host events and give back tothe community.
So it kind of happens in thatorder.
Um but that's that's reallyimportant.
That's how we that's how wefocus our efforts.
Marc Bernstein (11:15):
So how did you get from PW?
By the way, I went to highschool at Plymouth Whitemorse.
So that was the other PW in thefilm.
So that's why I tend to sayPWC.
The acronyms can always make amess of things.
Anyway, but how did you getfrom PW to to what you're doing
today, scholarhood?
Gary Brandeis (11:31):
Yeah, so so I I started, I I left PW, went to
work for a big national realestate development company in
the DC market, worked there forfor about a decade or so, and
was able to start out as anaccountant and then work my way
up the chain.
You know, and I think I left asa I left my first stint as a
vice president, and then I leftfor three years and then opened
(11:52):
an office for that company herein Philadelphia, and then became
an operating partner for thecompany, spent another five
years with the with the firm,and then left and started the
company I have now back in 2005.
So we're gonna have our 20thanniversary this summer of when
we started the company.
Congratulations.
Thank you.
Cool.
So But but really we are thecompany I have today, and we
started 20 years ago, is we'rean owner operator, which means
(12:13):
we're a vertically integratedreal estate company.
So we raise capital, we investthat capital and investing it in
acquisitions, obviously buyingexisting assets or building new
assets, but we do thedevelopment, we do the
construction, we do the capitaland the financing of those
assets.
And then once we're done, thenwe operate it.
And so uh about 15 years ago,we really pivoted toward
(12:35):
hospitality.
One, because there was a lot ofopportunity that we were seeing
in hospitality.
Marc Bernstein (12:39):
What were you doing prior to that?
Gary Brandeis (12:40):
Mostly office and industrial development.
And that's what my training waswhen I worked for the national
development firm.
And so we really pivoted towardhospitality because one, there
were opportunities in the marketfor that type of asset class.
And after we bought our firsthotel, I really fell in love
with the fact that one, I wasable to continue to do the
things I always did in realestate, which was the physical
(13:02):
aspect of the building, thefinancing and the capital
raising around the physicalbuilding.
But instead of just trying tolease space to other people and
sign long-term contracts orlong-term leases, we actually
had an operating business thatwas attached to our real estate.
And so we were selling rooms,we were selling conference and
meeting space, we were sellingbottles of water and potato
(13:22):
chips at the front desk.
We were hiring people inmanagement and sales and
operations.
So so in addition to doing allthe really things I liked in the
real estate space, we actuallygot to run a real business as
well.
And to me, that was acompletely different dynamic
than the other real estateclasses.
Marc Bernstein (13:36):
Aaron Powell I remember this right?
Are you also a little bit inthe restaurant business here?
I thought you were too.
Gary Brandeis (13:41):
I mean, uh a lot of our hotels have full service
food and beverage outlets.
And we're also in the weddingbusiness and corporate meetings
business.
So we do all those things.
Right.
But but I still get to be areal estate developer at the
same time.
Trevor Burrus, Jr.
Interesting.
Yeah.
Marc Bernstein (13:53):
Do you do you have to be a jack of all trades?
Because those are a lot ofdifferent businesses.
Trevor Burrus, Jr.
Gary Brandeis (13:57):
You really do.
For me, I do.
Now I have specialists in thecompany that are that are real
specialists in, let's say,revenue management and sales and
marketing and you know, chiefengineers of our building that
maintain our physical assets aswell.
For me, it's about knowing alittle bit about a lot of
things.
And for for me, and I I teach aclass in real estate
development, the you have to dothree things really well in in
(14:20):
real estate.
One, you have to be able tocrunch the numbers and do the
analysis and look at thereturns.
Two, you have to be able to doa market analysis and understand
what the market is drivingtowards your building.
And then three, you have tounder the physical part of the
building.
Marc Bernstein (14:33):
We are it's time for a break right now, so we're
gonna take a quick break, andthen Armon has a question for
you.
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(15:38):
We're back here on Founders Forum and Armon
Vincent, take it away.
Armon Vincent (15:42):
Thank you.
So I'm always fascinated by howentrepreneurs become
entrepreneurs.
What did that leap look likefor you?
Gary Brandeis (15:51):
I think it was a a long lead up to that leap,
right?
I always knew that I wanted tobe an entrepreneur and have my
own business, and I justhappened to be in the real
estate business from my trainingand the jobs I've had.
And so I knew my leap was goingto be in real estate.
And I think in 2004, uh I hadmy second stint at the national
firm with my office here inPhiladelphia.
And we had built a prettysuccessful local business.
(16:14):
And that that company inparticular was, hey, here's a
business card with our name onit.
You know, go make thingshappen.
So I was kind of anentrepreneur in a way with a big
national company behind me,which was really, really great
because it gave me some goodexperience.
But but I had a lot of peoplebehind me supporting me, you
know, in the corporate officewith capital, with insurance,
with financing and things likethat.
(16:35):
And so what happened was afterwe had sort of built up the our
portfolio here in Philly, Irealized when I started to look
at the PL for our region, I waslike, wow, we're making, we're
making money.
This is great.
And then I realized how much ofthat money was actually going
into my pocket, which wasn'tthat much, to be honest with
you.
And so I said, Boy, you know, II I could do this myself, and
(16:55):
all the money could go into mypocket, or most of it, anyway.
And so that was sort of theleap.
And at the time, I was married,had had two young kids, and
sort of it was a tough leapbecause I had a lot of
responsibility at home.
Uh fortunately at the time mywife was working and had
benefits, health insurance andstuff like that.
That that helped me, that gaveme that a little that additional
(17:15):
sort of comfort to take theleap and to really try to go out
on my own again.
And I think a combination of acouple of those things really
drove me to do it.
Marc Bernstein (17:24):
A follow-up to that that I'd like to ask you is
uh a lot of times I Armon and Iwere talking, I'm not sure we
talked about on the show, but Isaid, who was your model for
entrepreneurial?
He said, nobody.
He said, you know, he said, Ihe said I was always kind of
independent and I always askedquestions and I always, you
know, and I and I and I you knowI had to figure I figure things
out and that made meentrepreneurial.
(17:45):
Did you have any, was there anyblueprint that you had, or was
this just something out ofbecause you saw an opportunity,
you took it?
Gary Brandeis (17:52):
I would tell you that's probably one of my
biggest regrets, Marc, and whenI look back on my career that I
didn't have a real mentor.
Um I had a lot of great bosses,but they were my bosses in the
company.
So if I was the vice president,they were a senior vice
president or something likethat.
Um so I I I would tell you thatI I didn't necessarily have an
entrepreneurial meeting.
Marc Bernstein (18:09):
You didn't have parents that were in business or
anything like that, or notreally.
Gary Brandeis (18:12):
But but actually I I what I would say, and I've
said this before publicly, andand my father and I have had
lots of conversations about it,but I think my father was a
motivator for me to be anentrepreneur because frankly, I
saw him struggle throughout hiscareer to find a place or to
find a company or to figure outwhat could he could do to be
successful.
(18:32):
And I think he found someavenues for that, but not
something on a long-term scale.
And I think in seeing him withhis career and and and struggle
at dirt different times of hislife, I I knew that that I
didn't want to do that.
And so that was also amotivator for me.
Trevor Burrus, Jr.
Marc Bernstein (18:48):
So, like a lot of entrepreneurs, it was a way
to control your destiny.
Gary Brandeis (18:51):
Yes.
And and so one of my biggestfears was uh I don't want to be
a 55-year-old guy who gets laidoff from his job.
Right.
And what do you do next?
Right.
And so I didn't want that tohappen to me.
And I saw it happen to otherpeople, you know, y older people
that than I was at the time.
And and I felt that um I Inever I never thought I was
gonna be the smartest guy in theroom, but I thought that I
could outwork people and outwitpeople in a way.
(19:13):
Yeah.
Uh and and find opportunitieswhere others didn't or hadn't
before.
And that's sort of the I thinkif you look at our company and
the successes we've had, I thinkthat's probably where I would
point my finger to most.
Hard work and and findingopportunities that others don't
either don't want to do or don'tsee.
Aaron Ross Powell, Jr.
Marc Bernstein (19:30):
So it's interesting because and fear was
a motivator to a certainextent, which a lot of for a lot
of people it is.
It's interesting.
A lot of people becomeentrepreneurs for all different
reasons, and it's and it'sfascinating to me.
I always enjoy hearing aboutthat.
So I'm glad, Armon, you askedthe question.
Um what what kind of challengesdo you have to deal with in
your business?
And I know um Financial Timesare are one of them.
(19:52):
I know in recessions is anexample we've talked about.
Gary Brandeis (19:57):
So we we have two primary you know, our business
is really broken up into twobuckets.
One one is the real estatebucket, right?
The building, the capital, theequity, the debt, right?
And then we have the operatingpart of our business and the
hospitality side.
So that's hundreds ofemployees, you know, sales,
marketing, you know, what kindof benefits do our employees
get?
How can we control those costs?
(20:17):
All those types of things.
So the the the risks and thechallenges are a little bit
different in both.
So on the capital side, it'syou know, interest rates, right?
Um are the capital marketsfrothy or or or thin, right?
Is it easy to get capital bothfrom equity and l and debt?
Are lenders lending or are theyreally pulling back?
Marc Bernstein (20:36):
So those types of that's where the economy has
a big impact.
Gary Brandeis (20:39):
Definitely the economy impacts everything, but
in the capital markets is reallysort of the real estate side of
the risk.
And you know, right now it'sbeen challenging because for
many years we were paying twoand three percent on our debt,
now we're paying seven, eightpercent on our debt.
So even though the propertiesare performing really well, some
of our most of our propertiesare performing well, a lot of
the free cash flow is gettingeaten up by interest costs,
(20:59):
whereas before it wasn't.
So I think on the real estateside, it's mostly capital
markets that really drive therisk, and that's economically
driven by the Fed and otherthings that are happening in the
world.
Uh on the operating side of ourhotel, the challenges also are
impacted by the economy, right?
You know, we're in the hotelbusiness, we're in hospitality.
So people are if they'retraveling for leisure, it's
disposable income, and whereshould I spend that money?
(21:22):
Um corporate travel, also,right?
Are court are people travelingfor work?
If they are, great.
If they're not, obviouslywhat's happened post-COVID with
Zoom and Teams, a lot of thingscan happen without face-to-face
travel.
So the other things that impactus on the operating side are
access to staff and employees,right?
Um the can't you know theemployee markets are pretty
(21:43):
thin.
It's hard to find people,right?
Um and you know, providing goodbenefits and providing the
things that people need tosustain themselves.
Those things are becoming moreand more expensive.
So the challenges aredifferent, and then you know,
the and they're combined witheach other.
Marc Bernstein (21:58):
By the way, I should mention the name of your
company is called ScholarHotels, and we didn't talk about
why it's called that.
Let's talk about that for alittle bit.
Well, so so and how thatimpacts because it puts you in a
slightly different market thanthat.
It does.
Gary Brandeis (22:09):
And and I think you know, when you look at the
commercial real estatelandscape, hotels have
historically been considered themost risky type of investment.
Because there's five types ofreal estate, commercial real
estate classes.
So you have office, commercial,real uh I'm sorry, office,
industrial, multifamilyapartments, retail, and hotel.
And so four out of the fivecategories get their revenue
(22:32):
from contracts or leases, right?
So you sign a lease and youknow what you're gonna get for
the next year, two years, fiveyears, even ten, fifteen years.
In the hotel business, we weessentially get a one-night
lease or a two-night lease,right?
It's a little bit of a wackyacronym or cliche a bit.
But but you can create morevolatility, boo.
Marc Bernstein (22:50):
A lot of volatility.
Gary Brandeis (22:51):
You know, if I have a 100-room hotel, I have to
sell over 100 rooms everynight.
And so and so traditionallyit's been considered the most
risky.
Not as many people go into it.
And then the operating businesson top of it makes it even a
little bit more risky, right?
And so we looked at thatbusiness and said, well, how can
we mitigate that risk?
How can we reduce the risk?
And so at the end of the day,if your property is in close
(23:12):
proximity to a big demandgenerator, something that
creates consistent and reliabledemand for your hotel, then boy,
that that's a way to mitigaterisk and and reduce the the ups
and downs of of the sales cycle.
And so um I as a Penn Stategrad and spent time in Happy
Valley, you know, that was amarket that was starving for
more hotels and hotel rooms.
(23:33):
And so we took the leap andbuilt a ground up $55 million
development right in thedowntown area across the street
from campus.
And and we opened that hotel inMarch of 17.
And boy, that the impact ofbeing next to a $10 billion uh
public university hit us squarein the head and said, wow, the
the there's business.
I mean, the business was crazyconsistent.
(23:55):
Um you know, it we were reallybusy at certain times of the
year.
But even when the I was gonnasay it's a little seasonal,
right?
A little bit, but less than youthink, right?
When you have a when you have amajor public university that
has 50,000 students, a thousandclubs and organizations,
division one athletics, umresearch and development, that
particular market, I think.
Marc Bernstein (24:16):
All kinds of people visiting all the time.
All kinds.
Gary Brandeis (24:18):
And I would tell you, if you look at any large
public university in a smalltown, which is what that is,
it's it's one of the most uniquemarkets in the country.
There's only 10 of them thatyou can really point to that
have the same sort ofdemographic of small town with
big public university, it it'sit's a great it's a great
opportunity.
So we ended up investing a lotof money and and really sort of
(24:40):
doubled down multiple times inthat market to build the
portfolio there that has a lotof staying power.
Trevor Burrus, Jr.
Marc Bernstein (24:45):
Specifically in state college.
Gary Brandeis (24:47):
Correct.
But we have hotels in othercollege markets.
But our goal is to own hotelsand operate hotels that are in
very close proximity to majorcolleges and universities,
because one, we think it's justa good business idea, but it
also mitigates a lot of risk.
And we think because of theconsistent and reliable revenue
streams we get out of theuniversity, that our hotels are
worth more than a traditionalhotel, meaning our income is
(25:09):
more valuable than income from atraditional hotel.
Marc Bernstein (25:12):
Trevor Burrus, Jr.
your uh your cap rates, right,you I I would think they they're
gonna be higher, right?
Trevor Burrus, well, they'regonna be lower.
Or lower, I mean lower.
Gary Brandeis (25:20):
And that's exactly right.
So if I've got $10 million ofincome or net income from my
hotel portfolio and they're allsupported by major college
universities, and you haveanother $10 million of income
from another hotel portfolio,that's hotels randomly spaced
out in in a in you know a fewmajor markets, a few at the
airport, a few downtown, a fewin the suburbs, I would bet, I
(25:43):
would make a bet that my incomeis more valuable by anywhere
from 100 to 150 basis points.
Marc Bernstein (25:48):
So is that your is that your your when you look
at your forward focus, is thatis that going to be the focus
going forward to the Aaron?
It's definitely part of it.
Yeah.
Gary Brandeis (25:55):
Yeah.
And again, that's what the realestate side of the business is
all about, right?
Consistent consistent andreliable income that drives cap
rates.
Cap rates are risk, right?
Lower risk, lower cap rates.
So if there's lower risk in myrevenue models, then I sh I
deserve a lower cap rate.
Marc Bernstein (26:13):
Uh we we I'm gonna ask you about challenges,
but you've talked a lot aboutthe challenges as we've gone
along.
Let me ask you this.
If this were three years fromtoday, Carrie, and you're
looking back at the last threeyears, what would have to happen
for you and I if we're sittingthere talking about it to for
for you to feel that that was asuccessful three-year period in
your business and your life, ifyou'd like.
Gary Brandeis (26:33):
So what we're trying to do now, Marc, is we're
we're trying to take ouruniversity hotels, because we
believe that those types ofassets are what we call
generational type assets.
Meaning, you know, Penn State,as an example, you know, isn't
gonna go out of business.
The main campus, right?
And that's topical for today,but uh, it's gonna continue to
grow and and it's uh someone'snot gonna move the main campus
(26:54):
to somewhere else.
So we believe that having theseassets in close close proximity
to this large publicuniversity, these are
generational assets.
So my goal over the next fewyears is to shift the capital
structure of these assets out ofsort of a traditional investor
model and put it into what Icall a perpetual capital bucket
so that my company and myselfcan own these assets for a long,
(27:18):
long period of time.
Yeah.
And and so shifting from youknow, real estate investment
funds with investor partners,family offices, high net worth
individuals, things like that,to more of a retail investor
model uh where I can have largernumber of smaller investors
that know that they're gonna bein these deals for a really,
really long time.
Nice.
Uh that's sort of my plan forthe next three years.
Marc Bernstein (27:40):
Of course, I I we'll have to ask you offline
because we're out of time, butuh how how do you who continues
to run that?
You your succession plan youknow for perpetual business.
Gary Brandeis (27:49):
Exactly.
So as I get older, I'm lookingfor that.
What's what happens next andwho's gonna be running the
company and who's gonna benefitfrom it?
Marc Bernstein (27:56):
Exactly.
Uh well unfortunately, I thinkthat's all we have time for
today.
So I was gonna ask you aboutlegacy, but you just talked
about it to a certain extent.
So uh but we thank you all forbeing here this week on Founders
Forum.
And Gary, thanks for beinghere.
Armon, thanks for being here,and uh thank you, Eric, for
engineering, and we'll see youall next week.
The following programming is sponsored by Marc
J.
Bernstein.
The views expressed do notnecessarily reflect the views of
this station, its management,or Beasley Media Group.
Entrepreneur, founder, author,and financial advisor Marc
Bernstein helps high-performingbusiness owners turn their
visions into reality.
Through his innovative work andthe forward-focused forum, Marc
(00:20):
connects entrepreneurs toresources that fuel their
success.
Founders Forum is a radio showand podcast where entrepreneurs
share their journeys, revealingthe lessons they've learned and
the stories behind theirsuccess.
Join Marc and his guests for amix of inspiration, valuable
insights, and a little fun.
Now let's dive in.
Marc Bernstein (00:40):
Good morning, America.
How are you today?
It's another uh gloomy, rainyday, spring day in Philadelphia,
but we're happy inside thestudio here at WWDB.
And uh and you may be listeningto us on podcast.
And wherever you are, hopeyou're having a great day.
We're in the studio today withArmon, who was a guest on our
(01:04):
last show, who's serving asco-host of this show, and Gary,
and I will formally introduceboth of them in a little bit,
but we always start with a topicof the day, and I was thinking
this morning about questionsbecause I've been, you know,
whatever you whatever you do inbusiness, the questions you ask
are important, especially ifyou're in sales, but any any any
(01:27):
kind of people to peoplebusiness uh questions are very
important.
And I've been working a lot onthe last few years in terms of
thinking about powerfulquestions like how do you really
get to know somebody.
Um there's a there's a book byDavid Brooks that's out now, and
I think it's uh calledsomething like how do you really
get to know someone orsomething like that.
(01:48):
He's a journalist and he's acommentator on on television and
and it's uh it's a veryinteresting book and he talks
about the questions he asks.
So my quest my question for ourguests today is what is your
favorite question?
So I'll start with you, Armon,because I know you have one.
Armon Vincent (02:10):
So whenever I'm speaking to a client, a
prospect, mm, the first questionI really lean on is what
matters most within the contextof what we're discussing, uh, of
course.
But once they give me ananswer, then I use the standard
five Y's to dig in deeper andthey give me an answer, and I
(02:31):
you know try and go as far intothat as I possibly can until I
get to really what I think isthe the the the kernel of truth
or the pea underneath themattresses, if you will, to to
really understand how theperson's truly thinking about
something.
Marc Bernstein (02:47):
Do you ever get lost counting the whys?
Because I know I've got to dothat.
You know, it's a really goodconversation, you can get lost.
Yeah, absolutely.
But I I love that question.
Um and also if you get reallydeep, we we've talked about this
a little bit because um thelast show we talked about
boundaries.
And the problem with the whys,especially in a business
(03:09):
context, is you can start totread on boundaries when you do
that.
Armon Vincent (03:12):
Aaron Ross Powell Absolutely.
It can cross over into thepersonal, and you have to try
and uh artfully arrange it sothat doesn't happen and kind of
uh you know pull up, if youwill.
Gotcha.
So that's just an observation.
Marc Bernstein (03:24):
Gary, how about you?
Gary Brandeis (03:26):
That's a it's a great one.
And I think it's an interestingone to ask yourself.
I think for me, it's I'm notnecessarily in sales, so I'm not
trying to sell when I meet withpeople or I uh I'm connecting
with people.
I think my my biggest questionis what motivates you?
And a lot of people phrase itto me as like, what gets you out
of bed in the morning?
Right.
You know, why do you do whatyou do and what motivates you to
(03:47):
be either successful ormotivates you to get things done
that day?
And and to me, that's a deepquestion.
You can you can really probeinto somebody's history, you can
probe into somebody's you knowinner inner feelings and and and
things like that.
So to me, whenever when someonewhen er when anyone asks me
that question, it always givesme a good opportunity to explain
(04:08):
sort of my perspective onthings.
And so I I like answering thatquestion.
Marc Bernstein (04:12):
So what matters most and what motivates you?
Two very powerful questions, Ithink.
You know, I think those arereally good choices.
Um mine, and I've usedsomething like those as well,
but one of my favorite questionsthat I don't always remember to
ask, but I'm trying to rememberto do it, is after a series of
questions and after a wholeconversation, what other
(04:36):
question didn't I ask that Ishould have asked you?
You let them provide me with aquestion.
And I often get one.
And uh and when I don't, itmeans that we probably had a
pretty complete conversation.
So I like that one as well.
Um so we have Armon VincentArmon Vincent, did it again, who
(04:57):
is a um he is uh foundingpartner of Catalyst Technology
Partners, and please listen tohis podcast if you haven't
already.
And we have Grant GaryBrandeis, who is our guest
today, and he's CEO of ScholarHotels LLC.
Uh he started his real estatecareer in 1990, and his
(05:18):
experience and expertiseincludes development, finance,
acquisitions, dispositions,asset management, and joint
ventures.
He's been the principal partnerin four real estate investment
funds, including PB funds oneand two, investing over $350
million in all property typesand investment strategies since
2005.
So welcome, Gary.
(05:38):
Thank you, Marc.
So as I always like to start,tell me about how you because
you have a f a financebackground, right?
Trevor Burrus, Jr.
Gary Brandeis (05:47):
Accounting.
So I decided that accountingwas uh uh the best sort of
college education I could get.
Wasn't necessarily sure surewhat I wanted to do with my life
when I started college, but Iknew that I was going to be in
some sort of business.
And um, you know, people kepttelling me accounting is the
language of business.
So so learn accounting and youcan do lots of different things
from that.
And it was actually a reallygood choice for me.
Marc Bernstein (06:08):
Right.
Yeah.
And what were your what wereyour first but you had some jobs
outside of straight accountingpretty early on, I think, too.
Trevor Burrus, Jr.
Gary Brandeis (06:15):
Yeah.
So I I I started working when Iwas I was a young teenager.
Uh I was fortunate that mygrandparents had a home in in
Atlantic City, so I got to spendthe summers with them as a
teenager working at various uhnot so great restaurants uh on
the boardwalk in Atlantic City,you know, pizza shops, ice cream
(06:35):
stands, all you could eat,smorgasboards, and things like
that.
So I think I I got my firstwork experiences as a pot
washer, uh busboy, a uh uh ashort order cook, and things
like that.
And it's funny how my careercircled back to hospitality, but
that's really where I started.
Uh you know, I made a I made uhthe minimum wage at the time
and and worked really hard, butbut got some good experience.
Marc Bernstein (06:58):
So and you mentioned just a little while
ago you worked for a uh radiostation uh or was a spot.
Gary Brandeis (07:07):
Well I had the opportunity to.
Marc Bernstein (07:08):
I had the opportunity to, yeah.
Gary Brandeis (07:10):
I chose not I I chose to stay in the real estate
business, which which may havebeen a good decision or not so
good decision, depending on howyou look at it.
Marc Bernstein (07:16):
Trevor Burrus, so how did you get from
accounting to entrepreneur,which is really the story?
Trevor Burrus, Jr.
Gary Brandeis (07:20):
So I I I graduated from Penn State with
an accounting degree and and andhad the opportunity to work at
one of the big accounting firms,global accounting firms.
There were eight at the time,now there's four.
But I worked for one of theeight.
Price Waterhouse was the one Iworked for.
And the great thing aboutstarting in public accounting is
you know, you're a you're aclient-based service provider.
So in the two and a half yearsI was there, I got to see all
(07:43):
types of industries.
So we I was doing accounting,auditing, and tax work for
manufacturing clients, realestate clients, banking clients,
technology clients.
You know, so I I got to seeprobably six or seven different
types of industries where I mayhave been there for a few weeks
or maybe even a few months,depending on the size of the
client.
So after my two and a halfyears or so at Price Waterhouse,
(08:03):
I really sort of looked at thegamut of different industries I
got to work in, and real estateof all of them really resonated
with me the most.
And it made sense to me.
Uh I liked the people that werein that business that I got to
interact with, and so Igravitated toward that industry.
And I think the reason itresonated with me was really
twofold.
One, it was relatively easy tounderstand, right?
(08:24):
You collect rents from somebodyuh and then you pay your bills
and you have a profit or notafterwards.
And that was the second thing,right?
So it was a physical business,right?
It wasn't software ortechnology or banking, which is
somewhat abstract, right?
No, you can touch money, butbut you get f pretty far away
from that physical contact asyou get into banking.
(08:45):
So for me, I love the idea ofuh of a financial-oriented
business, but a physical assetbusiness.
And I like those thingscombined together.
Right.
And that's really what sort ofdrove me to that part of the
business or that industry.
Marc Bernstein (09:00):
So you started getting into real estate within
PWC, I guess.
Gary Brandeis (09:03):
Well, so I started to get more real estate
clients because I asked forthem.
Yep.
And so I was doing accountingand auditing and tax work for
some of the bigger real estatecompanies here in Philadelphia,
because I was in thePhiladelphia office of PW and um
got to see some of the peoplewho are.
Marc Bernstein (09:18):
I keep saying PWC.
No C.
Right, right.
Gary Brandeis (09:20):
Yeah.
Uh so so I really liked it.
And then and then after Ipassed the CPA exam and had my
required work experience, Idecided that I wanted to go into
the real estate business and uhended up getting a great
opportunity to move to theWashington, D.C.
area and and took a job as acontroller and a real estate
developer and really startedfrom the ground up.
So I was doing propertymanagement accounting,
(09:41):
construction accounting, uh, andthings like that.
You know, not very glamorous,not very exciting, but but I
would tell you now as I lookback on that, it gave me an
amazing base of knowledge.
Right.
You know, if you can do theaccounting for a construction
project or do the accounting onthe management of of office
buildings and industrialwarehouse buildings, you really
(10:01):
understand the business from theground up.
And I think that was reallyimportant for you.
Marc Bernstein (10:05):
Well, and I I think with what you're doing
today, numbers and tracking youruh you know, occupancy and all
that kind of stuff and thefinancials are extremely
important, I would think.
Trevor Burrus, Jr.
Gary Brandeis (10:14):
It's it's it's really important, right?
Um I mean I I what I say aboutour company is you know, our
first job is to make a profit,right?
We're not a non-for-profit,we're not a charity, right?
So our business is to makemoney for for our investor
partners to make sure we can payour mortgage and and we can we
can you know have a profitablebusiness, right?
And so withn without a profit,we don't have a business.
(10:35):
So my first job is to make aprofit and provide a good return
for our investor partners.
My second job is to reinvest inour physical assets of the
building and our people and andmaking sure that our buildings
are well maintained or clean,they operate properly, and our
guests can have a goodexperience in the physical
building.
And then if I can do that, thenoutside of investing our
(10:55):
profits and and and cash intothe building and our people, if
if we have something left overafter that, then we can be a
great community partner, right?
We can invest in our community,we can sponsor charities, we
can host events and give back tothe community.
So it kind of happens in thatorder.
Um but that's that's reallyimportant.
That's how we that's how wefocus our efforts.
Marc Bernstein (11:15):
So how did you get from PW?
By the way, I went to highschool at Plymouth Whitemorse.
So that was the other PW in thefilm.
So that's why I tend to sayPWC.
The acronyms can always make amess of things.
Anyway, but how did you getfrom PW to to what you're doing
today, scholarhood?
Gary Brandeis (11:31):
Yeah, so so I I started, I I left PW, went to
work for a big national realestate development company in
the DC market, worked there forfor about a decade or so, and
was able to start out as anaccountant and then work my way
up the chain.
You know, and I think I left asa I left my first stint as a
vice president, and then I leftfor three years and then opened
(11:52):
an office for that company herein Philadelphia, and then became
an operating partner for thecompany, spent another five
years with the with the firm,and then left and started the
company I have now back in 2005.
So we're gonna have our 20thanniversary this summer of when
we started the company.
Congratulations.
Thank you.
Cool.
So But but really we are thecompany I have today, and we
started 20 years ago, is we'rean owner operator, which means
(12:13):
we're a vertically integratedreal estate company.
So we raise capital, we investthat capital and investing it in
acquisitions, obviously buyingexisting assets or building new
assets, but we do thedevelopment, we do the
construction, we do the capitaland the financing of those
assets.
And then once we're done, thenwe operate it.
And so uh about 15 years ago,we really pivoted toward
(12:35):
hospitality.
One, because there was a lot ofopportunity that we were seeing
in hospitality.
Marc Bernstein (12:39):
What were you doing prior to that?
Gary Brandeis (12:40):
Mostly office and industrial development.
And that's what my training waswhen I worked for the national
development firm.
And so we really pivoted towardhospitality because one, there
were opportunities in the marketfor that type of asset class.
And after we bought our firsthotel, I really fell in love
with the fact that one, I wasable to continue to do the
things I always did in realestate, which was the physical
(13:02):
aspect of the building, thefinancing and the capital
raising around the physicalbuilding.
But instead of just trying tolease space to other people and
sign long-term contracts orlong-term leases, we actually
had an operating business thatwas attached to our real estate.
And so we were selling rooms,we were selling conference and
meeting space, we were sellingbottles of water and potato
(13:22):
chips at the front desk.
We were hiring people inmanagement and sales and
operations.
So so in addition to doing allthe really things I liked in the
real estate space, we actuallygot to run a real business as
well.
And to me, that was acompletely different dynamic
than the other real estateclasses.
Marc Bernstein (13:36):
Aaron Powell I remember this right?
Are you also a little bit inthe restaurant business here?
I thought you were too.
Gary Brandeis (13:41):
I mean, uh a lot of our hotels have full service
food and beverage outlets.
And we're also in the weddingbusiness and corporate meetings
business.
So we do all those things.
Right.
But but I still get to be areal estate developer at the
same time.
Trevor Burrus, Jr.
Interesting.
Yeah.
Marc Bernstein (13:53):
Do you do you have to be a jack of all trades?
Because those are a lot ofdifferent businesses.
Trevor Burrus, Jr.
Gary Brandeis (13:57):
You really do.
For me, I do.
Now I have specialists in thecompany that are that are real
specialists in, let's say,revenue management and sales and
marketing and you know, chiefengineers of our building that
maintain our physical assets aswell.
For me, it's about knowing alittle bit about a lot of
things.
And for for me, and I I teach aclass in real estate
development, the you have to dothree things really well in in
(14:20):
real estate.
One, you have to be able tocrunch the numbers and do the
analysis and look at thereturns.
Two, you have to be able to doa market analysis and understand
what the market is drivingtowards your building.
And then three, you have tounder the physical part of the
building.
Marc Bernstein (14:33):
We are it's time for a break right now, so we're
gonna take a quick break, andthen Armon has a question for
you.
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(15:38):
We're back here on Founders Forum and Armon
Vincent, take it away.
Armon Vincent (15:42):
Thank you.
So I'm always fascinated by howentrepreneurs become
entrepreneurs.
What did that leap look likefor you?
Gary Brandeis (15:51):
I think it was a a long lead up to that leap,
right?
I always knew that I wanted tobe an entrepreneur and have my
own business, and I justhappened to be in the real
estate business from my trainingand the jobs I've had.
And so I knew my leap was goingto be in real estate.
And I think in 2004, uh I hadmy second stint at the national
firm with my office here inPhiladelphia.
And we had built a prettysuccessful local business.
(16:14):
And that that company inparticular was, hey, here's a
business card with our name onit.
You know, go make thingshappen.
So I was kind of anentrepreneur in a way with a big
national company behind me,which was really, really great
because it gave me some goodexperience.
But but I had a lot of peoplebehind me supporting me, you
know, in the corporate officewith capital, with insurance,
with financing and things likethat.
(16:35):
And so what happened was afterwe had sort of built up the our
portfolio here in Philly, Irealized when I started to look
at the PL for our region, I waslike, wow, we're making, we're
making money.
This is great.
And then I realized how much ofthat money was actually going
into my pocket, which wasn'tthat much, to be honest with
you.
And so I said, Boy, you know, II I could do this myself, and
(16:55):
all the money could go into mypocket, or most of it, anyway.
And so that was sort of theleap.
And at the time, I was married,had had two young kids, and
sort of it was a tough leapbecause I had a lot of
responsibility at home.
Uh fortunately at the time mywife was working and had
benefits, health insurance andstuff like that.
That that helped me, that gaveme that a little that additional
(17:15):
sort of comfort to take theleap and to really try to go out
on my own again.
And I think a combination of acouple of those things really
drove me to do it.
Marc Bernstein (17:24):
A follow-up to that that I'd like to ask you is
uh a lot of times I Armon and Iwere talking, I'm not sure we
talked about on the show, but Isaid, who was your model for
entrepreneurial?
He said, nobody.
He said, you know, he said, Ihe said I was always kind of
independent and I always askedquestions and I always, you
know, and I and I and I you knowI had to figure I figure things
out and that made meentrepreneurial.
(17:45):
Did you have any, was there anyblueprint that you had, or was
this just something out ofbecause you saw an opportunity,
you took it?
Gary Brandeis (17:52):
I would tell you that's probably one of my
biggest regrets, Marc, and whenI look back on my career that I
didn't have a real mentor.
Um I had a lot of great bosses,but they were my bosses in the
company.
So if I was the vice president,they were a senior vice
president or something likethat.
Um so I I I would tell you thatI I didn't necessarily have an
entrepreneurial meeting.
Marc Bernstein (18:09):
You didn't have parents that were in business or
anything like that, or notreally.
Gary Brandeis (18:12):
But but actually I I what I would say, and I've
said this before publicly, andand my father and I have had
lots of conversations about it,but I think my father was a
motivator for me to be anentrepreneur because frankly, I
saw him struggle throughout hiscareer to find a place or to
find a company or to figure outwhat could he could do to be
successful.
(18:32):
And I think he found someavenues for that, but not
something on a long-term scale.
And I think in seeing him withhis career and and and struggle
at dirt different times of hislife, I I knew that that I
didn't want to do that.
And so that was also amotivator for me.
Trevor Burrus, Jr.
Marc Bernstein (18:48):
So, like a lot of entrepreneurs, it was a way
to control your destiny.
Gary Brandeis (18:51):
Yes.
And and so one of my biggestfears was uh I don't want to be
a 55-year-old guy who gets laidoff from his job.
Right.
And what do you do next?
Right.
And so I didn't want that tohappen to me.
And I saw it happen to otherpeople, you know, y older people
that than I was at the time.
And and I felt that um I Inever I never thought I was
gonna be the smartest guy in theroom, but I thought that I
could outwork people and outwitpeople in a way.
(19:13):
Yeah.
Uh and and find opportunitieswhere others didn't or hadn't
before.
And that's sort of the I thinkif you look at our company and
the successes we've had, I thinkthat's probably where I would
point my finger to most.
Hard work and and findingopportunities that others don't
either don't want to do or don'tsee.
Aaron Ross Powell, Jr.
Marc Bernstein (19:30):
So it's interesting because and fear was
a motivator to a certainextent, which a lot of for a lot
of people it is.
It's interesting.
A lot of people becomeentrepreneurs for all different
reasons, and it's and it'sfascinating to me.
I always enjoy hearing aboutthat.
So I'm glad, Armon, you askedthe question.
Um what what kind of challengesdo you have to deal with in
your business?
And I know um Financial Timesare are one of them.
(19:52):
I know in recessions is anexample we've talked about.
Gary Brandeis (19:57):
So we we have two primary you know, our business
is really broken up into twobuckets.
One one is the real estatebucket, right?
The building, the capital, theequity, the debt, right?
And then we have the operatingpart of our business and the
hospitality side.
So that's hundreds ofemployees, you know, sales,
marketing, you know, what kindof benefits do our employees
get?
How can we control those costs?
(20:17):
All those types of things.
So the the the risks and thechallenges are a little bit
different in both.
So on the capital side, it'syou know, interest rates, right?
Um are the capital marketsfrothy or or or thin, right?
Is it easy to get capital bothfrom equity and l and debt?
Are lenders lending or are theyreally pulling back?
Marc Bernstein (20:36):
So those types of that's where the economy has
a big impact.
Gary Brandeis (20:39):
Definitely the economy impacts everything, but
in the capital markets is reallysort of the real estate side of
the risk.
And you know, right now it'sbeen challenging because for
many years we were paying twoand three percent on our debt,
now we're paying seven, eightpercent on our debt.
So even though the propertiesare performing really well, some
of our most of our propertiesare performing well, a lot of
the free cash flow is gettingeaten up by interest costs,
(20:59):
whereas before it wasn't.
So I think on the real estateside, it's mostly capital
markets that really drive therisk, and that's economically
driven by the Fed and otherthings that are happening in the
world.
Uh on the operating side of ourhotel, the challenges also are
impacted by the economy, right?
You know, we're in the hotelbusiness, we're in hospitality.
So people are if they'retraveling for leisure, it's
disposable income, and whereshould I spend that money?
(21:22):
Um corporate travel, also,right?
Are court are people travelingfor work?
If they are, great.
If they're not, obviouslywhat's happened post-COVID with
Zoom and Teams, a lot of thingscan happen without face-to-face
travel.
So the other things that impactus on the operating side are
access to staff and employees,right?
Um the can't you know theemployee markets are pretty
(21:43):
thin.
It's hard to find people,right?
Um and you know, providing goodbenefits and providing the
things that people need tosustain themselves.
Those things are becoming moreand more expensive.
So the challenges aredifferent, and then you know,
the and they're combined witheach other.
Marc Bernstein (21:58):
By the way, I should mention the name of your
company is called ScholarHotels, and we didn't talk about
why it's called that.
Let's talk about that for alittle bit.
Well, so so and how thatimpacts because it puts you in a
slightly different market thanthat.
It does.
Gary Brandeis (22:09):
And and I think you know, when you look at the
commercial real estatelandscape, hotels have
historically been considered themost risky type of investment.
Because there's five types ofreal estate, commercial real
estate classes.
So you have office, commercial,real uh I'm sorry, office,
industrial, multifamilyapartments, retail, and hotel.
And so four out of the fivecategories get their revenue
(22:32):
from contracts or leases, right?
So you sign a lease and youknow what you're gonna get for
the next year, two years, fiveyears, even ten, fifteen years.
In the hotel business, we weessentially get a one-night
lease or a two-night lease,right?
It's a little bit of a wackyacronym or cliche a bit.
But but you can create morevolatility, boo.
Marc Bernstein (22:50):
A lot of volatility.
Gary Brandeis (22:51):
You know, if I have a 100-room hotel, I have to
sell over 100 rooms everynight.
And so and so traditionallyit's been considered the most
risky.
Not as many people go into it.
And then the operating businesson top of it makes it even a
little bit more risky, right?
And so we looked at thatbusiness and said, well, how can
we mitigate that risk?
How can we reduce the risk?
And so at the end of the day,if your property is in close
(23:12):
proximity to a big demandgenerator, something that
creates consistent and reliabledemand for your hotel, then boy,
that that's a way to mitigaterisk and and reduce the the ups
and downs of of the sales cycle.
And so um I as a Penn Stategrad and spent time in Happy
Valley, you know, that was amarket that was starving for
more hotels and hotel rooms.
(23:33):
And so we took the leap andbuilt a ground up $55 million
development right in thedowntown area across the street
from campus.
And and we opened that hotel inMarch of 17.
And boy, that the impact ofbeing next to a $10 billion uh
public university hit us squarein the head and said, wow, the
the there's business.
I mean, the business was crazyconsistent.
(23:55):
Um you know, it we were reallybusy at certain times of the
year.
But even when the I was gonnasay it's a little seasonal,
right?
A little bit, but less than youthink, right?
When you have a when you have amajor public university that
has 50,000 students, a thousandclubs and organizations,
division one athletics, umresearch and development, that
particular market, I think.
Marc Bernstein (24:16):
All kinds of people visiting all the time.
All kinds.
Gary Brandeis (24:18):
And I would tell you, if you look at any large
public university in a smalltown, which is what that is,
it's it's one of the most uniquemarkets in the country.
There's only 10 of them thatyou can really point to that
have the same sort ofdemographic of small town with
big public university, it it'sit's a great it's a great
opportunity.
So we ended up investing a lotof money and and really sort of
(24:40):
doubled down multiple times inthat market to build the
portfolio there that has a lotof staying power.
Trevor Burrus, Jr.
Marc Bernstein (24:45):
Specifically in state college.
Gary Brandeis (24:47):
Correct.
But we have hotels in othercollege markets.
But our goal is to own hotelsand operate hotels that are in
very close proximity to majorcolleges and universities,
because one, we think it's justa good business idea, but it
also mitigates a lot of risk.
And we think because of theconsistent and reliable revenue
streams we get out of theuniversity, that our hotels are
worth more than a traditionalhotel, meaning our income is
(25:09):
more valuable than income from atraditional hotel.
Marc Bernstein (25:12):
Trevor Burrus, Jr.
your uh your cap rates, right,you I I would think they they're
gonna be higher, right?
Trevor Burrus, well, they'regonna be lower.
Or lower, I mean lower.
Gary Brandeis (25:20):
And that's exactly right.
So if I've got $10 million ofincome or net income from my
hotel portfolio and they're allsupported by major college
universities, and you haveanother $10 million of income
from another hotel portfolio,that's hotels randomly spaced
out in in a in you know a fewmajor markets, a few at the
airport, a few downtown, a fewin the suburbs, I would bet, I
(25:43):
would make a bet that my incomeis more valuable by anywhere
from 100 to 150 basis points.
Marc Bernstein (25:48):
So is that your is that your your when you look
at your forward focus, is thatis that going to be the focus
going forward to the Aaron?
It's definitely part of it.
Yeah.
Gary Brandeis (25:55):
Yeah.
And again, that's what the realestate side of the business is
all about, right?
Consistent consistent andreliable income that drives cap
rates.
Cap rates are risk, right?
Lower risk, lower cap rates.
So if there's lower risk in myrevenue models, then I sh I
deserve a lower cap rate.
Marc Bernstein (26:13):
Uh we we I'm gonna ask you about challenges,
but you've talked a lot aboutthe challenges as we've gone
along.
Let me ask you this.
If this were three years fromtoday, Carrie, and you're
looking back at the last threeyears, what would have to happen
for you and I if we're sittingthere talking about it to for
for you to feel that that was asuccessful three-year period in
your business and your life, ifyou'd like.
Gary Brandeis (26:33):
So what we're trying to do now, Marc, is we're
we're trying to take ouruniversity hotels, because we
believe that those types ofassets are what we call
generational type assets.
Meaning, you know, Penn State,as an example, you know, isn't
gonna go out of business.
The main campus, right?
And that's topical for today,but uh, it's gonna continue to
grow and and it's uh someone'snot gonna move the main campus
(26:54):
to somewhere else.
So we believe that having theseassets in close close proximity
to this large publicuniversity, these are
generational assets.
So my goal over the next fewyears is to shift the capital
structure of these assets out ofsort of a traditional investor
model and put it into what Icall a perpetual capital bucket
so that my company and myselfcan own these assets for a long,
(27:18):
long period of time.
Yeah.
And and so shifting from youknow, real estate investment
funds with investor partners,family offices, high net worth
individuals, things like that,to more of a retail investor
model uh where I can have largernumber of smaller investors
that know that they're gonna bein these deals for a really,
really long time.
Nice.
Uh that's sort of my plan forthe next three years.
Marc Bernstein (27:40):
Of course, I I we'll have to ask you offline
because we're out of time, butuh how how do you who continues
to run that?
You your succession plan youknow for perpetual business.
Gary Brandeis (27:49):
Exactly.
So as I get older, I'm lookingfor that.
What's what happens next andwho's gonna be running the
company and who's gonna benefitfrom it?
Marc Bernstein (27:56):
Exactly.
Uh well unfortunately, I thinkthat's all we have time for
today.
So I was gonna ask you aboutlegacy, but you just talked
about it to a certain extent.
So uh but we thank you all forbeing here this week on Founders
Forum.
And Gary, thanks for beinghere.
Armon, thanks for being here,and uh thank you, Eric, for
engineering, and we'll see youall next week.
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