Korman Communities Inc. is expanding its AKA and AVE luxury extended-stay brands to new markets and plans to spend nearly $1 billion during the next three to five years making acquisitions.
The buying spree and foray into Los Angeles and London comes after the company successfully launched the brands nearly four years ago. Korman also intends to add properties in markets where it currently has a presence, which includes Philadelphia; New York; Washington, D.C.; and their immediate suburbs.
In Philadelphia, its AKA is at 135 S. 18th St. on Rittenhouse Square and it has an AVE complex off Route 30 in Malvern near the Great Valley Corporate Center. The two brands have been a success.
"We’ve created an alternative that doesn’t exist in the market," said Brad Korman, who along with his brother Larry helps run the family-owned company. "Our program allows a person who wants size and flexibility who doesn’t want to commit for a year."
AKA focuses on downtown areas, and AVE concentrates in suburban areas. It caters to clientele who need to stay for an extended period in roomy, high-end, furnished apartments that also have five-star hotel services and amenities, such as a concierge, café, swimming pool and business center.
The company has eight AVE and eight AKA properties and would like to add another 10 to 12 to each brand within five years. One of the challenges is finding properties with the right style and location. Korman Communities is picky about buildings it buys for the two brands.
"We want to be in great markets and in those markets we want to be in the best locations," Korman said. "Like in Philadelphia, it’s Rittenhouse. In Manhattan, we wanted to be in Midtown near Central Park. In D.C., we’re a block from the White House."
The other challenge is actually buying properties. While Korman Communities has about $400 million in equity already lined up from institutional and other partners, it’s having difficulty getting deals on buildings. The best opportunity it saw was buying struggling condominium towers but in many cases, a developer wants to relinquish just a portion of the total number of units. While Korman mulled this option, it has declined to invest in it.
"We prefer to own our own building. That way we can control the entire experience for our residents from the lobby to the concierge," Korman said. "The other thing we like about it is we are a company that buys and sells real estate. That’s something you can’t do if you don’t own the entire building."
Depending on the market, Korman Communities’ average deal ranges from about $60 million in Philadelphia to $80 million in Washington and $100 million in New York, and it then will spend another $5 million to $6 million in making renovations and upgrades.