Bobby Magee, Managing Partner, Escalera Capital
As a historic city rich with culture, San Antonio continues to cement itself as a growing powerhouse for business in the state of Texas. This presents key opportunities for the commercial real estate sector. In an interview with Invest:, Bobby Magee, managing partner for real estate investment firm Escalera Capital, highlighted the firm’s approach toward the development and restoration of historical buildings. “It is all about the people,” he said. “The people and the history have to be considered.”
What is the overview of your operations?
Escalera Capital is a vertically integrated real estate investment company headquartered in San Antonio. Our business focuses on integration, innovation, and impact. Through integration, we are a portfolio of different operating businesses composed of Presidian Hospitality, Source Strategies, and Mulberry Realty Partners. We are active real estate investors and operators. On the innovation side, we pride ourselves on doing things differently and working to build on that and innovate with the projects we do and how we do them. On the impact side, that is central to our companies’ cultures, and really housed in our nonprofit arm, the Escalera Foundation. We are building the Hope Lodge in San Antonio in partnership with the American Cancer Society, which broke ground in late March of this year. We are also working on the Morgan’s Hotel at Morgan’s Wonderland. Morgan’s Hotel will be an ultra-accommodating, fully inclusive establishment — the first of its kind.
What makes San Antonio an ideal location for your operations?
I believe it is the city’s culture. San Antonio, both professionally and on a leisure basis, is an amazing place to live and work. The local culture focuses on supporting each other, and this is reflected in the ease of working partnerships and collaboration with constituents and stakeholders. From a real estate investing perspective, it is a friendly place to operate in, and the city welcomes you to invest back into San Antonio. This is a unique culture that I have not seen in other markets of similar size. Similarly, this is an amazing place to grow and raise a family. It is also a great place for workforce talent, and we have a lot of distinguished educational facilities. There are highly educated and driven people moving into the city, which makes it easy to build a company with talented people.
How would you define the hospitality landscape in San Antonio?
San Antonio is growing rapidly, which poses a great opportunity for the real estate investing landscape. In some asset classes, we are seeing some oversupply. From a hospitality perspective, the industry has been challenged lately as a result of tightening margins and increasing construction costs. At the same time, we feel these are short-term hurdles to tackle. In Downtown San Antonio, we have the No. 1 and 2 tourist destinations in the entire state of Texas, and we are actively investing back into the Alamo and the River Walk. From a long-term perspective, we love Downtown. We think hospitality is an incredible asset class to invest in Downtown and an impactful one, where we can give all the tourists a positive experience and encourage them to come back again.
What challenges are you keeping a close eye on?
We face some broader challenges that are unique and dynamic, especially as they relate to the ongoing tariff situation. We are monitoring material costs closely as well. As we acquire a hotel and begin to perform renovations, a lot of the materials are sourced through overseas vendors. With those costs increasing, it makes it even more challenging to get new hospitality developed or just acquisitions to underwrite. Combined with this factor, there are cost pressures on every line item of the operating statement. Insurance costs are increasing materially. Also, continually advancing systems and software, while they get more robust and beneficial, are getting increasingly expensive. There is cost pressure all the way around. In forecasting this out over the next year or two, for example, it gets hard to predict what will happen given how dynamic our economy is currently.
What real estate investing trends are you watching closely?
We are seeing the community rallying toward investing in the Downtown area. Escalera Capital has several projects happening in Downtown San Antonio. This is a main area of focus, and there is a ton of support for Downtown. It is more than just new development and skyscrapers. What I love about the nascent opportunities in the Downtown area is the renovation of historic buildings. It is pouring love and investments into the same structures that made San Antonio, while also combining this with new growth through large partnerships like Hemisphere Park, the minor league baseball stadium, and other incredibly large projects happening Downtown. I am incredibly happy to see this trend. Our firm is participating in it most notably with the La Villita Assembly Hall, which is a perfect example of this broader trend. It is a historic building that is culturally significant and a key opportunity to honor its legacy and preserve it for the future.
What goes into the preservation and modernization of a historic building?
It is all about the people. Our head architect is part of the original firm that designed and built the assembly hall back in 1958. As locals who are immersed in this history and well versed with historic adaptive reuse, they made it easy to start by distilling and narrowing down the important design elements, such as what subtle design elements create the vibe, which is a term we use a lot when talking about design and how it incorporates into the user experience within an environment, We approach this with intentionality to continue the vibe and nuanced design elements. The other component is research. We are intentional about understanding history and take the task of doing extensive research seriously, not only when it comes to the design aspect but also how it connects with the surrounding neighborhood and its history. With the Assembly Hall project, for example, we went back to the Canary Islanders who originally founded San Antonio, and that’s where we started. We took the historical lessons to inform how we should be answering the challenges of design today. The people and the history have to be considered, and oftentimes they are not the first thing to come to mind when planning out a design. For us, this is how we start our design process, and we make sure we maintain that focus for the duration of the project.
What does your community involvement strategy look like?
Community involvement is a core piece of our operations. It is big and small. We do small events, such as working with food banks or with municipalities in their events. On a large scale, our partners and team members worked for five years to raise capital and design and plan a Hope Lodge for San Antonio in partnership with the American Cancer Society and Methodist Healthcare Ministries. We just broke ground on this hotel, which will provide free lodging for cancer patients and their caregivers across South Texas. We are incredibly excited about this opportunity. We are intentional about working on large-scale projects that will have a significant impact on the community. Impact is core to our investing philosophy. With La Villita Assembly Hall, our goal and thesis is that renovation and activating this property will positively impact all of the artists who run their business from La Villita. It will positively impact the River Walk tourist experience as well as impact our culture by honoring the past and revitalizing it for the future. Our community involvement is displayed in nuanced ways, but it is core to our company culture and almost every facet of our operations.
