Graduate Hotels: Ben Weprin

In 2014, Ben Weprin decided to take people’s best college memories and spin them into a new business: Graduate Hotels. Each of the chain’s properties was decorated to reflect the character of the college town in which it was based, with photos of famous alums or life-sized sports mascots in the lobby. After 13 years in commercial real estate, Ben got the idea for Graduate after renovating a dilapidated Days Inn in Chicago, and realizing that a hotel can tell a story as well as—maybe even better than—a box of cereal or a pair of shoes. Although the Covid lockdowns threatened to bankrupt Graduate, Ben was able to secure the chain’s future by selling it to Hilton, and today the 35 (+) chain is expected to add dozens more properties. This episode was produced by Devan Schwartz with music composed by Ramtin Arablouei. It was edited by Neva Grant with research assistance from Katherine Sypher. Our engineers were Robert Rodriguez and James Willetts. You can follow HIBT on Twitter https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis, and sign up for Guy's free newsletter at guyraz.com http://guyraz.com/. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 0:45Guy Raz?

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• 1:30Guy Raz?

  based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2:00 AM kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one hard question. How do we make sure AI goes well for people?

• 2:14Guy Raz?

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• 4:23Guy Raz?

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• 5:07Guy Raz?

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• 5:21Speaker 01

  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? I 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.

• 5:47Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:58Guy Raz?

  I'm Guy Raz, and on the show today, how Ben Weprin found a wide open opportunity in a space most of us would never look: chain hotels, and grew graduate into a brand that's made its mark on college towns across the country.

• 6:18Guy Raz?

  Before we start today's episode, I want to tell you the brief story of this show, why we do it, and how you can help us. So 15 years ago, I took a class at Harvard Business School, just one. I wasn't a student there. And that was the first time I heard about the case study method. Basically, a lot of business school classes are taught using stories. The problem, to access those stories, you need to pay thousands of dollars in tuition or subscription fees. So I thought, why not do something better, except make it free to anyone, anywhere, anytime, anyplace? We launched How I Built This in September of 2016. And since then, we've built an archive

• 7:01Guy Raz?

  of over 600 business school-quality case studies, 100% free for anyone to listen to. The show is designed to help you navigate challenges, not just in your business, but in your life. And I really believe that every single person is an entrepreneur. What do I mean by that? Well, we're all architects of our own lives. We all want to do interesting and fulfilling things. And so, in a sense, whether you run a business or thinking about starting something, or just like the stories on this show, you use entrepreneurial thinking every single day. And this show is designed to help you do just that. Every single episode of How I Built This is designed to stand the test of time.

• 7:46Guy Raz?

  So if you go back and listen to our earliest episodes with Sarah Blakely of Spanx or Kevin Systrom of Instagram, you will find that they are as relevant as ever. And we think we can help even more people. And so, if you love this show, if you find value in it, if it's inspired you or helped you in any way, I would love it if you could do two things for me, and both are free. The first is to click the Follow button in your podcast app so you never miss a new episode of How I Built This. And the second is to tell a friend or share our show on social media and help us reach even more people. And if you're feeling particularly generous and have a few bucks to spare,

• 8:30Guy Raz?

  then please subscribe to Wondery Plus on the Wondery app. It's really not that expensive and you get every single Wondery show, including my other shows, "Wow in the World" and "The Great Creators", one week early and ad-free. Okay, now on to today's episode. Today's story is a bit of a departure from the consumer-facing brands and products we usually focus on. This episode is about a real estate business, except the founder of this business, Ben Webberin, really treated it almost like a CPG in that he leaned really hard into the idea of story, especially when it came to his best-known brand, Graduate Hotels.

• 9:14Guy Raz?

  Ben saw an opportunity to do something in the hotel space that no one, believe it or not, was doing at scale. Now, most chain hotels are completely forgettable. You check in, you sleep, you make a conveyor belt pancake in the morning, and you check out. These hotels are totally interchangeable, whether you're in Chicago, or Denver, or Pittsburgh. So with Graduate Hotels, Ben Webberin created a chain of hotels that were reasonably priced, but with a distinctive and memorable personality, a story to tell. The way he accomplished this was by launching his hotels in college towns. And why college towns? Well, if you went to school in a place like Eugene, Oregon,

• 9:58Guy Raz?

  or Ann Arbor, Michigan, or Oxford, Mississippi, you may already know the answer. Those places have a distinctive personality, driven in part by the universities at their centers. They have sports teams and mascots, annual rituals and events, and a history and lore that get handed down from generation to generation. And as Ben discovered, you can build all of those things into the decor of the hotel and then attract guests who want to relive their college years or who just want to feel like they're staying in a real place. Today, there are nearly 40 Graduate Hotels located in college towns across the US and even in the UK,

• 10:40Guy Raz?

  each one distinctively decorated to reflect the surrounding town and its culture.

• 10:46Guy Raz?

  The brand was recently purchased by Hilton, but Ben's investment firm, AJ Capital, still owns and manages all the properties. Now, to be clear, Ben didn't exactly stumble into a successful hotel chain. Before starting Graduate, he worked in real estate for 13 years. Everything from being a landlord, all the way up to helping run luxury hotel brands. And along the way, he learned some pretty hard lessons about the business. Ben was raised in Dayton, Ohio. His parents divorced when he was in his teens, and he lived mainly with his dad, who became a commercial real estate broker.

• 11:22Speaker 01

  He was a real hustler, like super gritty and, you know, like, you know, putting together kind of wild, like trading a mobile home park for, you know, for apartment complex in Middletown or Sidney or these kashak small Ohio towns, you know, sort of southwest Ohio. And then he got into, you know, commercial brokerage. And that's actually how I was introduced into that space. But he, he went through a lot. He really, you know, my dad was a great inspiration and a really hard worker and got divorced, had cancer, you know, survived it.

• 11:53Guy Raz?

  Wow.

• 11:54Speaker 01

  And all kind of at the same time. So I saw, and I lived with him and we were like, you know, going to big lots to buy groceries. We didn't know what we were doing. We had no idea how to do anything. And we're just kind of, you know, figuring it out along the way, which has been a good metaphor for the rest of my life.

• 12:09Guy Raz?

  Were you a good, were you a good student in high school? Or just average student?

• 12:13Speaker 01

  I was average. I didn't really care. I was always kind of excited to get out of school and start working. And, you know, I had, when I was, I had a job my first day that I turned 16. I worked at a shoe store, Just for Feet, where your 13th pair is free. And, you know, love that, right? Love the hustle and the sales and the conversations with different people. And, you know, I loved that culture. I loved Nike and Michael Jordan and, you know, the whole thing was, you know, super inspiring. But I was like obsessed. I mean, I, I took the money for my bar mitzvah and went to Michael Jordan's basketball camp.

• 12:47Guy Raz?

  Wow. Oh, in Chicago?

• 12:49Speaker 01

  In Chicago, yeah. My, my cousin drove me to Elmhurst, Illinois.

• 12:52Guy Raz?

  And, and that was when he actually would show up for a day, right?

• 12:56Speaker 01

  Oh, he was there the whole time. He was there the whole time.

• 12:58Guy Raz?

  He was there the whole time?

• 13:00Speaker 01

  He was there for four days.

• 13:01Guy Raz?

  Wow.

• 13:02Speaker 01

  It was like a four day camp and I went up to him and introduced myself and I've never been shy in that regard and went up to him and I was like, you know, I'm your biggest fan and it's really funny. So I have like, you know, we took a picture with the team, like your team with Michael Jordan.

• 13:18Guy Raz?

  Yeah.

• 13:19Speaker 01

  And my cousin was with me there and it was, I remember because it was $400 and I paid for it from my bar mitzvah savings.

• 13:24Guy Raz?

  Nice. Good, good use of that money. And, and Michael Jordan, I mean, amazing. Um, I, I guess, you know, later on, of course, you, you, when it came time for you to go to college, uh, you went to Tennessee, actually to, to University of Tennessee in Knoxville, uh, where red, that you majored in business. Um, and from what I gather, you weren't, you weren't necessarily like motivated by making good grades or, you know, achieving academically, right? Like it seems like you wanted to be working on something, like something that could maybe turn into a business.

• 13:58Speaker 01

  Absolutely. I always thought I was going to do something bigger than what I was doing at that time. And so I was ready to get out of school. I was ready to get out of high school. I was ready to get out of college.

• 14:07Guy Raz?

  Yeah.

• 14:09Speaker 01

  I was ready to, you know, get into the workforce and see what was possible.

• 14:13Guy Raz?

  Hmm. Um, your dad, I guess, when, when you were in high school, this is when he, he kind of started getting involved in, in, in real estate as a, as a broker. Um, and I guess that you, you had that model in mind because out of college, you decided to become a, a broker as well.

• 14:30Speaker 01

  Yeah.

• 14:31Guy Raz?

  And you got a job at, at the real estate firm, uh, Marcus and Milichap. It's a, it's a national firm. And I guess you worked in Chicago, uh, and there were Chicago office for a few years and, and did pretty well there. Uh, and then you wound up moving back to Tennessee, right?

• 14:45Speaker 01

  Yeah. My buddy from college, William, he had sold a deal in Nashville. He was working at the same company in Atlanta and said, you know, Nashville could be an interesting opportunity. And so went to the guy that I was working for, a great guy and said, you know, I, I'd like to move to, move to Nashville and open an office. He starts cracking up. He's like, you're out of your mind. It's a terrible idea. You've got good trajectory here, so forth and so on. But, you know, I was, always wanted to do my own thing. I didn't even know what that was, but I always wanted to do my own thing. And so William and I moved to Nashville. Still working for Marcus Milajap. They didn't even know they had an office there, right? Like, we just...

• 15:22Guy Raz?

  But just to be clear, I mean, this is a real estate firm, right? And, and, and it, I mean, this is not a great analogy, but it's a little bit like Avon, right? Where you are a representative and then you're an independent contractor and then you get a commission. So they, so it sounds like they didn't really care where you were as long as you were...

• 15:39Speaker 01

  Right. They had zero overhead. They get a percentage of the commissions that you make. I mean, we didn't make anything for a while, but we were, you know, we were determined to figure it out.

• 15:49Guy Raz?

  And commercial real estate or...

• 15:51Speaker 01

  Smaller apartment complexes.

• 15:53Guy Raz?

  Right. Okay. So you, so you were, you were on the hunt for apartment complexes that were for sale?

• 15:57Speaker 01

  Well, we would, we would talk to sellers and convince them to sell, or if they were interested in selling and say, you know, if you think this is worth 3 million, what if we got you 4? Or, you know, whatever, or if you think it's worth 5, we can get you 6. Would you pay a commission if that happened? We'd have all these pocket listings and we would just hustle.

• 16:16Guy Raz?

  So, so how did you, I mean, eventually you must have convinced somebody to let you represent them to sell their, their apartment building. What, how did you, how did that, how did that unfold?

• 16:27Speaker 01

  It was, you know, I remember we'd gone a long time without, you know, like first when we got there and it was really slow. We were going all around middle Tennessee. Memphis, Nashville, East Tennessee, Knoxville, trying to, you know, drum up these listings so we could sell and make a commission. I remember we had gone, I don't know, four or five months, six months without a dollar when we got there. And I was down like, I remember I had like, you know, eight quarters. And I went like trying to figure out what I was gonna do for dinner. And I went to, you know, rallies and got two for two big Bufords and was sitting there like, if this doesn't work, like, and I, I had this one deal that was in contract. You didn't know what was gonna close. If it doesn't close, I'm out of here. And, you know, we made, we ended up closing the deal. It was in, you know, it's east of the airport in Nashville and I made like $8,000 and stayed.

• 17:13Speaker 01

  And then, you know, we sort of got some momentum and built, you know, some, some trust. And, you know, it was, it was, it was a great experience.

• 17:20Guy Raz?

  And, and so while you're in Nashville, you're, you're, you're starting to gain momentum, right? And you mentioned you, you made $8,000 in commission, but, but that must've taken, I mean, that took a long time to get that, that deal through.

• 17:32Speaker 01

  Everything was like pushing the ball up the hill. And like I'd saw people that were successful in that space in Chicago or elsewhere. I was like, you just gotta do the work and put in the time and like I had to make it work. I still feel like that, like you just feel like you have to succeed. And so all the most successful people that I've, you know, read about or met, it's like, who can, you know, eat the most shit and just keep going forward.

• 17:56Guy Raz?

  Okay. So, so while you were in that two-year period in Nashville, um, working on selling commercial real estate. Um, I think at a certain point you, you managed, you and William managed to buy a building and renovate it?

• 18:08Speaker 01

  Yeah, we bought a building. It was 206 Fourth Avenue. There was five stories above it. It was a super narrow, skinny building. I think we bought it for like $600,000, right? Like.

• 18:19Guy Raz?

  How did you guys finance that?

• 18:21Speaker 01

  We, so we each put in a little bit and then a friend of mine from Chicago and his dad that I had known, put in some money. We got the seller to carry some paper and convince the lender that we were gonna, you know, our plan, which was to renovate the top floors, um, you know, over time. It was a really cool, like Romanesque, um, cars type building, skinny, narrow. It was called the Utopia Place.

• 18:47Guy Raz?

  Downtown Nashville or?

• 18:49Speaker 01

  Downtown, downtown Nashville was dead in 2003, four, I mean, not.

• 18:53Guy Raz?

  Yeah. So why did you think that this had, that there was a prospect that you could turn this into?

• 18:59Speaker 01

  I loved the building. I loved the architecture. I loved the story. It was an old hotel.

• 19:03Guy Raz?

  Yeah.

• 19:04Speaker 01

  So the ground floor was a cleaners, so it had income there. The top floor was vacant, had really great sort of, you know, just bones. And our ground floor tenant was a strip club called Brass Stables.

• 19:17Guy Raz?

  Okay, but your only tenant in that building was the strip club and cleaners?

• 19:22Speaker 01

  Yeah.

• 19:22Guy Raz?

  So you knew that you were gonna have some income coming in?

• 19:25Speaker 01

  I had income.

• 19:26Guy Raz?

  Okay.

• 19:26Speaker 01

  Yeah, and that covered our debt service and taxes and insurance.

• 19:32Guy Raz?

  But you had to renovate the rest of the building that you wanted to turn into apartments?

• 19:36Speaker 01

  Correct, we were gonna convert it into apartments.

• 19:38Guy Raz?

  But with the 600 grand to buy it, how are you gonna get the financing to renovate it?

• 19:44Speaker 01

  I was gonna figure it out. I was gonna pre-sell the condos, right?

• 19:48Guy Raz?

  Right.

• 19:48Speaker 01

  And then have that money to go and finance the construction.

• 19:51Guy Raz?

  Okay, so if you sold them all, you would do really well.

• 19:54Speaker 01

  The numbers looked really good on paper.

• 19:56Guy Raz?

  Yeah.

• 19:56Speaker 01

  And I had no idea what I was doing.

• 19:59Guy Raz?

  Yeah.

• 20:00Speaker 01

  Like, I mean, when I say no idea, like, I mean, it was absolutely like a dog catching a car. And I was like, alright, I got these tires, what am I supposed to bite them? I don't really know. Started reading about it, talking to other developers and meeting all these people in the space. Came up with this plan, priced it out, and it looked pretty good on paper. We pre-sold some condos, I think we sold like half of them, pretty quickly. And then the price of steel went up like four times. And I was like, oh shit, this doesn't work anymore. And so, we had to refund the money from the deposits for the people that had bought the condos.

• 20:42Speaker 01

  And just kept the cash flow from the cleaners and the strip club. And said, okay, well, this retail thing is interesting, because we were actually doing pretty well. We were making money on the building.

• 20:53Speaker 01

  We ended up buying the two buildings next door, 208 and 210. 208 had Lonnie's, which was this incredible karaoke place. And 210 had Fiddle and Steel, which is an iconic guitar bar. And started cash flowing from those. And you do some of these things where I was just drawn to it. I liked the historic architecture and the story part of it.

• 21:16Guy Raz?

  All right. So during that time, did you ever end up renovating those buildings? Or did you just sell them?

• 21:20Speaker 01

  We just kept them.

• 21:21Guy Raz?

  You kept them?

• 21:22Speaker 01

  We kept them. We kept them until, I don't know, maybe 2015. Somebody in Nashville had kind of taken off and somebody came and said they wanted to build a hotel on that site. And so we decided to sell it to them. And that's kind of was my first, it was my first forte into sort of development or being a landlord. And I was there, I was like totally happy in Nashville and my wife and I-

• 21:44Guy Raz?

  Who you met, you met her in Nashville?

• 21:45Speaker 01

  We met in Knoxville. So we went to college together. Yeah. And we were like best friends. So actually she's a big part of the story, but we, I was friends with her and decided I was going to tell her that we were in love, that I was in love with her. Like I was going to tell her one night. And I tried to get tickets to go to the Academy of Country Music Awards. I couldn't get them. And I was, well, I was going to tell her that night, like take her to the show, come back and then tell her like, I'm in love with you. I think we should date. And so all day I was trying to get these tickets. And I was thinking I had actually been given a job offer right before this from Larry Levy, whose son was a close friend of mine while I was in Chicago. And Larry is like the most dialed, connected, creative

• 22:28Speaker 01

  entrepreneur I'd ever met in my entire life. And I'm like in love with this girl and she doesn't know it. And I tried to get her tickets and I'm thinking about Larry. I was like, I want to be like Larry. I can't even get a ticket to go to a country music show in my own hometown. And so I finally, long story short, somebody calls me and is like, I've got tickets. So I raced back at her, come back, take her to the show. The whole time I'm thinking about, you know, I'm going to tell her I love her. I want to move to Chicago. I'm not really sure. So we go back after the show, we drive, I'm going to drop her in her car. I tell her to give her this whole soliloquy about how I'm in love with her and we should date and move to Chicago and this whole thing. And she's like, no, that's not, that's not going to happen. I don't think that's a good idea. So I'm like, you

• 23:12Speaker 01

  know, crestfallen and kind of made the decision then that I was going to go back to Chicago and work for Larry. And my wife, like, you know, not at the time, two weeks later was like, all right, let's give this a shot. So we got married and then we moved to Chicago to work for Larry.

• 23:28Guy Raz?

  And Larry, Larry Levy, had made a name for himself, I think, in restaurants, like at stadiums and in food, like, right, in spaces and stuff. And I guess part of his business was also in in real estate development, right?

• 23:42Speaker 01

  Absolutely. And he, you know, Larry is a serial entrepreneur. And that is, you know, I've learned so much from him in terms of if you're a great business person, you can apply that to a lot of different categories.

• 23:53Guy Raz?

  Yeah.

• 23:53Speaker 01

  Levy Restaurants was his core business, but he had been doing real estate development and acquisitions. And, you know, Larry actually had started as a broker too, which I thought was, you know, a great, you know, synergy. And so he built one mag mile. He built a ton of, you know, really, you know, great projects in Chicago.

• 24:12Guy Raz?

  I'm curious, when you moved back to Chicago and you start working for Larry, now, I mean, you were working for a real estate, national real estate broker, but not really. You were an independent person.

• 24:23Speaker 01

  Yeah.

• 24:23Guy Raz?

  You were your own boss. You made your own schedule. You decided you were in charge. You were your boss. And now you're working for somebody else. How was that transition for you?

• 24:35Speaker 01

  It was interesting. I was so out of my comfort zone when I first got there. And I was so out of my comfort zone that I couldn't go back.

• 24:45Guy Raz?

  What do you mean out of your comfort zone? You were, you thought you were in over your head? Like, what is this? Like, this guy's giving me all this, this responsibility? I don't know what I'm doing, kind of thing?

• 24:53Speaker 01

  Absolutely. I mean, I had no idea what I was doing. Complete imposter syndrome. Every single day, I thought someone was going to tap me on the shoulder and be like, it's time to go back to Dayton.

• 25:01Guy Raz?

  You're fired.

• 25:01Speaker 01

  Yeah. Go back to Dayton. You're fired. And I'm like, you know, and I was so grateful for the opportunity. I didn't want to disappoint him or let him down. And he was doing incredibly complex transactions in places all over the country and world.

• 25:17Guy Raz?

  And you were like 27, 28?

• 25:19Speaker 01

  Yeah. Yeah, exactly. And so one day, he called me and he was like, hey, I'm going to buy a hotel in Cabo San Lucas, Mexico.

• 25:28Guy Raz?

  Wow.

• 25:28Speaker 01

  He's like, will you go check it out? I was, you know, ears on the ground, but I did not know what I was doing. And I certainly never stayed or seen a hotel like this.

• 25:36Guy Raz?

  Yeah.

• 25:36Speaker 01

  And I'm sitting there and they walk over and he said, Mr. Gomez will be there in 10 minutes. And I'm sitting and I walk over to the side of the hotel and it's got this infinity pool, the Sea of Cortez, rocks, like the restaurant with the waves crashing, literally whales jumping. It was like Wizard of Oz stuff, like black and white. It became color and I'm like, this is amazing. The hospitality, the service culture, the people, the destination. I was all in like it was my, you know, that was it for me. I was like, I kind of like sitting right there and I thought, well, Larry built his business around his passion. I want to travel. I want to be here. I want to be able to match my personal passions with my professional ambition.

• 26:17Speaker 01

  And when I got into that hotel and I spent that time and got to know the people and the left brain, right brain, the operating business, the restaurant. I mean, it was like all of these things coming together and I was like, I was like, I'm in.

• 26:32Guy Raz?

  Wow. So you guys, you guys wind up buying this hotel. And I think Larry also partners with, with a group called Oberge hotels to, to start acquiring more properties.

• 26:44Speaker 01

  Right. And, you know, and at that time, maybe seven or eight hotels.

• 26:48Guy Raz?

  Some people might know it. They, they own several hotels in the U S and even overseas. And they're known for these really very luxurious hotels. They've got some in Napa and here in California and, and all over the U S.

• 27:01Speaker 01

  Yeah.

• 27:02Guy Raz?

  Including in some historic buildings. And I guess, I guess Larry wanted to acquire more properties to add to, to the portfolio.

• 27:09Speaker 01

  Correct. And so I got on a plane, right? I was like, I'm going to go meet all of these owners, just like I had done with, you know, apartments on the west side of Chicago. I'm going to go out here and meet these owners of these assets and see if there's an opportunity to operate or acquire the hotels on a bearish's behalf. And I loved it and I was, you know, really learning on the fly, having incredible experience with Larry. And then. You know, Q408 hits and Lehman announces and the world falls completely off a cliff.

• 27:40Guy Raz?

  Yeah.

• 27:40Speaker 01

  My wife is pregnant with our first child and one day I was in his office and just kind of going through the reps and he goes, you know, I think I'm going to sell a bears or interest in the company.

• 27:54Guy Raz?

  He had, he owned like a quarter of it or a third of it.

• 27:57Speaker 01

  It was about a quarter. Yeah, it was about a quarter.

• 27:59Guy Raz?

  And he decided to sell it because he wanted to hedge, given the economic situation.

• 28:04Speaker 01

  Yeah. And like, you know, you know, in terms of in a recession and when, you know, what was going on and luxury was kind of a four letter word at that point. And so,

• 28:12Guy Raz?

  Yeah, yeah.

• 28:13Speaker 01

  I was completely crestfallen when he said he was going to sell it because I love the brand. I love the people. I love the destination. I like, I love the idea of what that company could become. And I also think there's a huge opportunity for this brand in a recession to actually, you know, acquire assets or to, you know, build the, the portfolio of operational because they're, you know, these smaller hotels, if they're in trouble, they could use distribution, revenue management, everything that a bears could bring to a table. And so I went home and told my wife, like Larry's going to sell a bears. She was like, oh, we got to figure it out. I was like, yeah, you're right. We do. I've been thinking that, like, let's go, let's, let's buy it from them.

• 28:51Guy Raz?

  All right. So you're, so you're basically, this is you're around 30 years old and he, he wants to sell his interest and, and it sounds like you are about to go up to him and say, Hey, I want to buy them from you.

• 29:04Speaker 01

  Yeah, thousand percent. So I went into his office, I don't know, the next day or two days later, and I sat down, I said, Larry, if you're going to sell, I'd like to buy it.

• 29:14Guy Raz?

  What was the price, by the way?

• 29:17Speaker 01

  It was at that time, I think nine, it was like $8 million, eight and a half million.

• 29:22Guy Raz?

  So, I mean, a lot, but not like 100 million, not like 50 million.

• 29:26Speaker 01

  If you told me it was 850 today, it felt like the same thing.

• 29:29Guy Raz?

  I mean, but still, so, so it was eight million. God, imagine a bears resorts. He owned a quarter of it for $8 million. It's unbelievable.

• 29:37Speaker 01

  This is a long time ago. It's worth a lot more.

• 29:38Guy Raz?

  Worth a lot more now.

• 29:39Speaker 01

  Yeah. Yeah, I think it'd be, it was a good, fair deal for him. It wasn't astronomical.

• 29:44Guy Raz?

  Yep.

• 29:44Speaker 01

  And so came to him, and I remember sitting down, there's this Daniel Burnham, you know, quote in his office, no small plans.

• 29:50Guy Raz?

  Yep.

• 29:50Speaker 01

  I'm sure you know that quote. And I sat there and I was super nervous and I read that. I 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? Like, where are you gonna get the money? I was like, I don't know, but I'm gonna 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. It's, it's 08, right? It's, you know, Q4.

• 30:23Guy Raz?

  Nobody's lending.

• 30:24Speaker 01

  No, there's no lenders. I was like, Larry, I'm gonna figure it out. He's like, all right, I'll give you 60 days.

• 30:31Guy Raz?

  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 Inn. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 30:51Guy Raz?

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• 31:33Guy Raz?

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• 32:18Guy Raz?

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• 33:03Guy Raz?

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• 33:23Speaker 02

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• 34:04Guy Raz?

  Hey, 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, Oberge. Which means Ben has just a few months to come up with $8 million. So how much cash did you have in your bank account to put in at the time?

• 34:29Speaker 01

  Nothing. I think I might have put in $50,000. And I, you know, I went everywhere.

• 34:34Guy Raz?

  Yeah. How are you going to get $8 million in 60 days in 2008, when the, when the economy is crashing?

• 34:40Speaker 01

  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. And just like, I had to like clearly articulate my vision, but, you know, didn't charge them anything to do it.

• 34:54Guy Raz?

  You were going to handle all of the, you were going to do all the work.

• 34:56Speaker 01

  Well, I was going to do the work and like, I own 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.

• 35:09Guy Raz?

  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.

• 35:17Speaker 01

  No. I was asking anyone or everyone that I thought would be interested. And I was, remember, my, my largest investor was, is, was dermatologist in Dayton, Ohio.

• 35:30Guy Raz?

  And he happened to have some cash.

• 35:31Speaker 01

  Very successful, incredibly close, my mom's best friend.

• 35:34Guy Raz?

  Right.

• 35:35Speaker 01

  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. Turns out, there's once in a lifetime opportunities all the time. If you put yourself in that position.

• 35:56Guy Raz?

  Yeah.

• 35:56Speaker 01

  But we did it and we closed.

• 35:58Guy Raz?

  How many people ended up investing?

• 36:00Speaker 01

  There was 15 people. I was short a couple million dollars at the end. And Larry, you know, decided to roll his equity into that.

• 36:07Guy Raz?

  Right.

• 36:08Speaker 01

  And, you know, you know, back me, which was a great, you know, you know, sort of, you know, vote of confidence. And when I was talking to other people, so Larry's staying in, he believes in it. He just, you know, giving me my shot.

• 36:21Guy Raz?

  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 Oberrich with a bunch of investors in your minority stake. What could you actually do with that?

• 36:43Speaker 01

  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.

• 37:03Guy Raz?

  Look for hotels that were interested in maybe selling to Oberrich.

• 37:06Speaker 01

  And that's where I really learned like what made a unique, distinctive, one-of-a-kind asset, the sort of heirloom-type property that would fit within that collection.

• 37:15Guy Raz?

  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 the shares, to buy Larry's shares of Oberrich, you created a separate investment group called AJ Capital, right?

• 37:32Speaker 01

  Correct. We had a Christmas card that had gone out that December that my wife and I sent, said, wishing everybody a happy and healthy year and an adventurous journey. And I didn't know the name of my company, and we were putting together an LLC to buy the Oberrich interest. And my Christmas card was, what's the name? And I hadn't even thought about it. I said, well, it's Adventurous Journeys, and that's how we started it.

• 37:55Guy Raz?

  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 Oberrich. On 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 Oberrich.

• 38:22Speaker 01

  Absolutely. And then also had worked with Larry on a hotel that he owned in Miami Beach. This was 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. And 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, it's going to be for sale. And I'm like, holy cow. Like, I'm gonna, like, this is amazing opportunity. This, and you know, and when you're thinking about it and during a recession, and when the market is just completely stagnant, I didn't

• 39:06Speaker 01

  have any baggage. Like, I was sitting there, like, ready to go, right? So many interesting businesses and, you know, opportunities start in a, in a recession. And I was like, okay, like, I should buy this hotel. Even though I, I had to act, even though I didn't have the money, the capability, the, 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, I'll do it.

• 39:30Guy Raz?

  Wow.

• 39:30Speaker 01

  Put a contract on The Raleigh. Amazing hotel. It was like 106 rooms and this spectacular space. I had this idea that I was going to bring in Rayo's in the back.

• 39:41Guy Raz?

  The famous New York Italian restaurant that's impossible to get a reservation in.

• 39:46Speaker 01

  Yeah. 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 Schreger model where, you know, or Barry Stern, like, like where the food and beverage is very integral to the asset and helps tell the story. I was like, yeah, Rayo's is a story. It matches. Iconic, historic.

• 40:03Guy Raz?

  Yeah.

• 40:04Speaker 01

  Hard to get into, unique, distinctive. And so I met the guys from Rayo's. Frank Senior and Junior Flydown. And Frank Senior is a legend, right? He is a real restaurant icon. He's just a character, straight out of Central, you know, he came down, he had on gold. And, and I loved Frank. And I remember I said, Frank, what's the, like, the, what's the most important thing, you know, 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 in Miami Beach for him to be the operator.

• 40:49Speaker 01

  He's committed. We spend six months working on it. You know, on the plans, we went to Miami Beach Historic. I had these investors. I didn't know anything about them. I found them in Miami. They were based there. They understood the hotel.

• 41:00Guy Raz?

  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, you know, the promised land eventually.

• 41:13Speaker 01

  Yeah. They wanted to, you know, get into hospitality and, I don't know, six months, seven months in, they called me down and, you know, say, hey, can you give a presentation on Reos? And they knew all about Reos. We had signed the operating agreement. Everything was going. And the guy sits me down, he's like, hey, we want you out of the Raleigh and same thing with Reos.

• 41:32Guy Raz?

  What do you mean they want you out?

• 41:34Speaker 01

  They don't want me to be involved anymore.

• 41:36Guy Raz?

  Who said this? Sorry.

• 41:39Speaker 01

  My investors.

• 41:40Guy Raz?

  Wait, but you got the group together?

• 41:41Speaker 01

  I did.

• 41:42Guy Raz?

  What do you mean? They want to kick you out?

• 41:45Speaker 01

  They did not want, they wanted to take over operations.

• 41:48Guy Raz?

  But you were still, but you were still a shareholder. I mean, you would still get paid.

• 41:53Speaker 01

  Yeah. I was a GP.

• 41:55Guy Raz?

  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?

• 42:01Speaker 01

  Correct. And they wanted Reos to go.

• 42:04Guy Raz?

  Wait, why?

• 42:05Speaker 01

  Because they wanted to take control of it and do it themselves. They thought they could do a better job than I was doing or my idea, my vision for the property didn't align with theirs.

• 42:13Guy Raz?

  Hmm.

• 42:14Speaker 01

  There was no turning back. And I was going to have to tell Reos, Frank Pellegrino, who is a legend and 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.

• 42:26Guy Raz?

  Yeah.

• 42:27Speaker 01

  I had to go tell him that I was getting kicked out and they wanted him out of the Raleigh.

• 42:35Speaker 01

  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 then the guy sat me down. It was like, I was completely crestfallen. I fly up there and I go to 114th and Pleasant and I go in the, the back room where, where Frank would, you know, check the dupes and smoking cigarettes. And I'm, you know, 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 and you're, you know, you're, you're family to me.

• 43:17Guy Raz?

  Hmm.

• 43:18Speaker 01

  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 lo, 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 added some people. Um, and like I lived in Lincoln Park and I would go to this gym on, on Lincoln Avenue, Equinox. And every single day I walked in front of this vacant, which used to be a Days Inn, dilapidated hotel on the park. Great sort of just, you know, red brick, simple, great views, but had been closed down for four, I don't know, 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.

• 44:01Speaker 01

  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, you know, why this neighborhood is special to people at a low price point? That could be a successful business proposition.

• 44:21Guy Raz?

  Yeah. So, all right. You, you decided that, uh, you wanted to acquire this old Days Inn near, in, in Chicago, near DePaul University. And 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?

• 44:41Speaker 01

  No. And.

• 44:44Speaker 01

  I didn't want to travel as much. I, you know, 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.

• 44:52Guy Raz?

  And did you also, did you, I'm just curious, did you also feel like, you know, this obéris 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.

• 45:06Speaker 01

  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, and I still, look, I didn't have the experience in 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'd 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. They wanted to be in Lincoln Park

• 45:48Speaker 01

  and close, you know, to us. And so could we build a hotel that was served as that sort of second bedroom? And DePaul was, you know, 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. Like Frank Baum lived in Lincoln Park when he wrote Rise of Oz. And, you know, Abraham Lincoln, obviously with Lincoln across the

• 46:29Speaker 01

  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.

• 46:37Guy Raz?

  Yeah. The whole idea of this, of buying this, this hotel and renovating was to then have it reflect the neighborhood story, basically inside.

• 46:46Speaker 01

  Bingo. That's it. Take the outside, inside.

• 46:49Guy Raz?

  I mean, this was not going to be a luxury hotel.

• 46:51Speaker 01

  No, not at all.

• 46:53Guy Raz?

  But it was going to be a nice hotel.

• 46:55Speaker 01

  Yeah, it was gonna be good enough, which is a huge market, right? It'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, you know, Four Seasons or Rich Carlton or whatever. And then, you know, it was just good enough, right? You had to do it at a low price point because there was no, um, you know, comps or history. We didn't know what we were going to be doing. It said 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, you know, what you're paying in terms of replacement cost. And so we had to do it on a really tight budget.

• 47:33Guy Raz?

  And I'm curious, I mean, why did you think there was an opportunity to buy this dilapidated days in there? Like, like, I mean, who, who was gonna stay there?

• 47:42Speaker 01

  I thought my parents would stay there.

• 47:44Guy Raz?

  Yeah.

• 47:44Speaker 01

  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, um, you know, sort of light bulb moment was like, there's no competitive set here and that's a great business.

• 48:00Guy Raz?

  So you get this hotel and, and the idea is let's get it renovated first, right? And by the way, what was the price of the hotel? Like under six, $7 million or more?

• 48:09Speaker 01

  No, it was more than that. I really don't remember.

• 48:12Guy Raz?

  But again, you had to get a group of investors to buy it. You could not buy this.

• 48:16Speaker 01

  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 gotta work with my brother who's, you know, a construction expert.

• 48:36Guy Raz?

  Got it.

• 48:37Speaker 01

  So that's how that I ended up working with both of them. That was, look, I mean, all of these deals, they're such building blocks to, you know, you just gotta do deals and build a, you know, build a skill set.

• 48:47Guy Raz?

  Yeah. Okay, so you're gonna renovate this hotel, but you wanna, I mean, you wanna have a good restaurant in there, you wanna have a coffee bar, and you want it all to kind of reflect the neighborhood. So you were gonna have like posters and art and memorabilia in the hotel?

• 49:02Speaker 01

  Absolutely. It was gonna be, basically wanted to feel like my apartment in Chicago. And the food and beverage was gonna get local people to come in and see it and say, wow.

• 49:12Guy Raz?

  Yeah.

• 49:12Speaker 01

  And then we built this rooftop bar that overlooked, that was magnificent, it still is, that overlooked Lincoln Park, that looked downtown, that had Great Lake, Michigan views. And people came here and said, wow, 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.

• 49:31Guy Raz?

  So how did, so how did the hotel do? I mean, did it, was it successful right away?

• 49:34Speaker 01

  Crushed.

• 49:35Guy Raz?

  Right away?

• 49:36Speaker 01

  Right, right away. I mean, people came into the restaurant and the hotel and it just, it just, it just caught kind of lightning in a bottle. And you can't plan for that. It just happens or it doesn't. And it worked immediately.

• 49:50Guy Raz?

  And you called it Hotel Lincoln?

• 49:51Speaker 01

  That was, yeah, which was the original name, which we brought back.

• 49:54Guy Raz?

  And, and inside the hotel, like in the lobby, you would see like references to the people and the things that were around there, like Abraham Lincoln, as you mentioned, David Mamet, the playwright, uh, uh, who else? What else? What other kinds of things were in there?

• 50:10Speaker 01

  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, you know, we went and bought, you know, cheap flea market art to cover it, sort of gallery wall, which has been a trademark, you know, ever since. We just made it feel warm and comfortable.

• 50:28Guy Raz?

  So, all right, now this is the, this is your hotel?

• 50:31Speaker 01

  Yeah, this is it. I live down the street.

• 50:33Guy Raz?

  Yeah.

• 50:34Speaker 01

  Developed it, own it, like, super proud, grateful, loved every bit of it, right? And then I was like, well, you know, find problem, fix problem, right? That's what we did. There was, 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.

• 50:59Guy Raz?

  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.

• 51:09Speaker 01

  For 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 in real estate is so block by block. And building by building. And so identified four neighborhoods in Chicago. We'd done Lincoln Park, we wanted to do Gold Coast, CBD, kind of Michigan Avenue, and then West Loop. And we ended up doing, you know, 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? And it was, without a question, Hotel Lincoln.

• 51:45Guy Raz?

  That was the one that really stood out. And you're thinking, how can we replicate this? How can we get our model?

• 51:52Speaker 01

  That was it.

• 51:53Guy Raz?

  So where did you start looking?

• 51:54Speaker 01

  Yeah, we thought, you know, neighborhood hotels close to a university. That was it. There wasn't any science behind it. It was all art.

• 52:01Guy Raz?

  But you thought university because you saw the success of the Lincoln Hotel near DePaul.

• 52:06Speaker 01

  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. And so we thought that was an interesting business model that had probably 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 LA 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 we're looking at that one.

• 52:49Speaker 01

  And then one day, a guy in my office, and we were super small, he said, well, look in Ann Arbor. You know, I told you, I'm a Buckeye. I don't even go to Ann Arbor. Like, Michigan'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.

• 53:29Speaker 01

  And so went back and started, literally was like, without any research, without any diligence, I was like, we should, we should start a call. We should do Ann Arbor and Oxford and we should start a college brand.

• 53:40Guy Raz?

  Just 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, a brand of hotels in college towns. That was not the plan quite yet.

• 53:52Speaker 01

  It had never even crossed my mind to build a brand.

• 53:54Guy Raz?

  You were a, a, a-

• 53:56Speaker 01

  Developer.

• 53:56Guy Raz?

  A developer, yeah.

• 53:57Speaker 01

  Yeah, never even thought about building my own brand. But then when something didn't, you know, when we, it was like, this was the Sunday. This was like, we could put all the stuff that we've been doing together collectively into one really unique, you know, unique package, the connecting all of these dots. You know, all of this, you know, 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 had 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? I figured out pretty quickly, it's hard.

• 54:43Speaker 01

  Easy to say, hard to do, but that's actually a great recipe for a new business, too.

• 54:50Guy Raz?

  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.

• 55:20Guy Raz?

  Hey, 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 US. But now he needs a name for it, and during a brainstorming session-

• 55:39Speaker 01

  We were kind of spitballing, throwing names against the wall. And we were thinking of other academic, but also like 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.

• 56:00Guy Raz?

  And it's got 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.

• 56:14Speaker 01

  Totally. And we were going to become vertically integrated. We're going to own the hotel. We were going to operate the hotel.

• 56:22Guy Raz?

  Yep.

• 56:22Speaker 01

  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.

• 56:36Guy Raz?

  So when you started to talk to investors about this idea now, by this point, you had a track record in Chicago. So it's a different conversation. But in general, I imagine people would say, well, what happens in the summertime when these places are dead?

• 56:49Speaker 01

  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, you know, the sort of, we coined the term visitation where people would come with their students, prospective students and to look at a school.

• 57:06Guy Raz?

  Yeah.

• 57:06Speaker 01

  There was art crawls. There was so much going on in these culturally rich inspirational markets in the summer. We were way busier in the summer than we were in the winter.

• 57:16Guy Raz?

  So 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.

• 57:29Guy Raz?

  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.

• 57:38Speaker 01

  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 were sort of 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. Model room is when you build the room that you're going to do throughout the entire hotel. And I had 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, we're like some fraternity party.

• 58:20Speaker 01

  You guys, we're, 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.

• 58:34Guy Raz?

  Yeah.

• 58:34Speaker 01

  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. A year, two years later, I remember seeing that solo cup painting in my office or not in my office, in our, in our warehouse. You can imagine the stuff that we have in there. And I saw it in that hotel in Arizona needed, it didn't, it never got, 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

• 59:17Speaker 01

  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. And so we started really getting into the idea of having conversations. We built this writers 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, you know, 12, 24, 36 months, particularly during 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? What we would do is, once we would get all of these pieces,

• 1:00:02Speaker 01

  we would find sort of a central character that we were going to base the design and the story off of.

• 1:00:07Guy Raz?

  An imagined character.

• 1:00:08Speaker 01

  Imagined or real?

• 1:00:10Guy Raz?

  You basically have a profile of a person that you that would be the main mascot?

• 1:00:16Speaker 01

  Exactly. They would be the mascot when we were designing the hotel. So talking about Chapel Hill, it was Michael Jordan.

• 1:00:24Guy Raz?

  Yeah.

• 1:00:24Speaker 01

  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. And we would implement it into the furniture, into the carpet, into the story, into the design.

• 1:00:40Guy Raz?

  The just the design of each one was completely different?

• 1:00:44Speaker 01

  Completely different.

• 1:00:45Guy Raz?

  Which is very inefficient, right?

• 1:00:47Speaker 01

  For incredibly inefficient. That's the complete opposite of a, you know, large scale chain hotel.

• 1:00:54Guy Raz?

  Yeah.

• 1:00:54Speaker 01

  They 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 kind of this term nostalgia, you 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.

• 1:01:24Guy Raz?

  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?

• 1:01:53Speaker 01

  I'm glad you picked Eugene. It's one of my favorite assets and markets. And the central character was Phil Knight, Steve Prefontaine.

• 1:02:01Guy Raz?

  The great runner who sadly passed away as a young man, but yep.

• 1:02:05Speaker 01

  And Nike as a company started there, right? Bill Bowerman was the coach, Phil Knight was a student or was an athlete.

• 1:02:13Guy Raz?

  Yep.

• 1:02:13Speaker 01

  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. Pierre 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. And Nike has a metaphor for that, has that vision in the track and field, which is the, you know, they're most synonymous with, and the colors and the mountains. I mean, it is an absolutely beautiful campus that's, you know, submerged in the woodlands. And, you know, Eugene is a, is a, 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

• 1:02:56Speaker 01

  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. Yeah. 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, you know, mission meant to so many different people. And the whole idea of just inspiring other people to chase their dreams.

• 1:03:27Guy Raz?

  I guess, you know, did you, I mean, did you, so as, 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, 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?

• 1:03:49Speaker 01

  Yeah, there was, you know, people that were reluctant, but you know, when you own the asset, it, you know, and you do exactly what you say you're gonna do, time and time again. You build that trust and that goodwill. And it took a little bit of time, right? These, 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, you know, level, very specific. You know, magnifying glass and they come through and said, these people cared. We had to connect to all of them and make them buy in to the mission.

• 1:04:28Guy Raz?

  So, um, I mean, this is sort of a, a march to of growth from 2013 up until today, but there's a huge speed bump along the way, which was COVID. All of a sudden universities empty out hotels. I mean, I stayed in some hotels during COVID and it was really unpleasant. You know, everyone's wearing masks and there's, you know, wet, not wet wipes. You know what I mean? Like, like sanitizer everywhere and, and, and the room service is shut down. And it really was not fun to stay in a hotel during COVID. How, how did that impact the business? I mean, it must've been very significant.

• 1:05:03Speaker 01

  We really started, I think, 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. You start, we opened, you know, 15 hotels. We had another 15, 17 under development.

• 1:05:26Guy Raz?

  Yep.

• 1:05:27Speaker 01

  We went to zero.

• 1:05:29Guy Raz?

  Wow.

• 1:05:30Speaker 01

  Everything stopped. We had 2,200 employees. I, I thought someone was playing a joke. Like, when it happened, 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 created this great niche. We figured out our, our cadence, how to do this and tell the story and go into these markets. The brand had really caught and then it just went to zero and it was illegal to travel. And, you know, operating businesses were not designed to do zero. And, you know, we didn't know what to do. Right? We were like, okay, what we number thing, one thing we have to do is continue our show, our commitment, our conviction, our, um, you know, our dedication to these markets. Right?

• 1:06:15Speaker 01

  Like, they don't want them to think that we're this, you know, out of town investment firm. It doesn't matter. So what can we do? We could open up the doors and let in first responders. We could open up the doors and let students who are stuck stay in the campus. Like, whatever we could do, we had, we had a skeleton crew. Right? We would have the general manager at, you know, these hotels. We had almost half of them that were under development and we were just trying to stay alive.

• 1:06:35Guy Raz?

  And presumably, there were a lot of layoffs, for one, for starters, it had to be.

• 1:06:39Speaker 01

  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.

• 1:06:50Guy Raz?

  So when did, so I mean, basically, within a year, I mean, 2020 was sort of the disaster.

• 1:06:58Speaker 01

  Disaster.

• 1:06:58Guy Raz?

  Did you start to see it turn around by the end of that year, or was it really well into 2021?

• 1:07:03Speaker 01

  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 college, high school kids that had never gone, that were college-bound and never visited a school.

• 1:07:21Guy Raz?

  Yeah.

• 1:07:22Speaker 01

  So we had a massive amount of parents and students coming to looking at schools and evaluating, where are they going to spend the next, you know, 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, they'd 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, we're 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 execute, to deliver the projects, continue to pay our mortgages, and, you know, we, we, we made it through, we got out.

• 1:08:05Speaker 01

  You know, 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 Nocetta, who is an incredible CEO and leader and, you know, runs Hilton. And there, Chris had told me, you know, when I started, you know, we started the brand and said, hey, if you ever, you know, I think this is really unique, 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.

• 1:08:37Guy Raz?

  Hilton, you called Hilton, well, Chris said Hilton, who ran, who said, we're, we're ready to talk about maybe selling the brand?

• 1:08:46Speaker 01

  Yeah. Was it? It was a solution.

• 1:08:49Guy Raz?

  I mean, It was a solution to?

• 1:08:51Speaker 01

  Paying off the expensive capital that we had taken to survive COVID.

• 1:08:55Guy Raz?

  Yeah.

• 1:08:56Speaker 01

  And, and 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, you know, overall occupancy and our overall performance of property level. And that was the business plan.

• 1:09:25Guy Raz?

  So essentially by doing that deal, like had you, I mean, the deal with Hilton and I'll just say they, it was closed in March of 2024. They 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.

• 1:09:53Speaker 01

  Hilton can now, Hilton owns the brand.

• 1:09:56Guy Raz?

  Yeah.

• 1:09:56Speaker 01

  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.

• 1:10:13Guy Raz?

  Yeah. I mean, it's an incredible deal because, I mean, you got, you know, you know, you still retain all the assets, right? And you essentially hand over your brand bible, which is really valuable. Obviously they, they put a high price on it, $210 million. Had you not done that deal, um, you, I mean, you, were you, would it have been harder for you to expand Graduate out on your own because, just because you were still had to catch up from the losses of COVID?

• 1:10:46Speaker 01

  You could have lost the whole thing.

• 1:10:47Guy Raz?

  You could have lost a whole thing, even though it was, it was, you know, profitable and.

• 1:10:52Speaker 01

  It wasn't, it wasn't an operational or profitable issue. It was a capital and a timing issue.

• 1:10:57Guy Raz?

  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 then, and then once you, once you buy a property, this clock starts ticking. Right? And it's gonna, at some point, it's the timing has to be perfect because you're gonna have to pay back the loan or sell the property and everything has to happen in the right way in your business.

• 1:11:24Speaker 01

  Yeah, I mean, you know, if there wasn't COVID, if there was, we wouldn't be having, we would 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, you have to make these decisions as a real estate, you know, developer and investor, and they're cyclical and things change. And it's like, you know, I asked for all this. I'm already 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.

• 1:12:02Guy Raz?

  So when you think about, about the, the journey you've taken, the path you, you, you know, you, you ended up on and you're still on it, how much of it do you, do you attribute to the work you put in and the grind and how much do you think had to do with luck and timing?

• 1:12:13Speaker 01

  99% luck.

• 1:12:15Guy Raz?

  It's luck.

• 1:12:16Speaker 01

  Yeah, you have to take the lottery ticket. You still gotta go to the store and cash it. So you have to have some awareness and you want to connect dots and like, it's just luck. It's like, I was 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, 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.

• 1:12:46Guy Raz?

  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. It 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 gonna 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,

• 1:13:28Guy Raz?

  ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyraz.com. This episode was produced by Devin Schwartz with music composed by Ramtin Arablouei. It was edited by Neva Grant with research assistance from Catherine Seifer. Our engineers were Robert Rodriguez and James Willetts. Our production staff also includes Alex Chung, Carla Estevez, J.C. Howard, Sam Paulson, Chris Messini, Kerry Thompson, John Isabella, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.