Access Point Financial Poised for Growth
On October 5th, Atlanta based hotel lender Access Point Financial, Inc. (APF) announced the recapitalization of the company in a transaction led by WPC Investments (WCPI). The recap saw the successful exit of Stone Point Capital from the business in a $350 million transaction. The new investor has also committed to facilitate further expansion of the company. “We are excited to gain exposure to this unique asset class,” said WCPI’s Chief Investment Officer Michael Gontar, “and are looking forward to continuing the tremendous growth that APF has achieved since its founding.”
Commenting on the transaction, Jon S. Wright, APF’s chairman and CEO, said, “We are delighted with the success we have achieved since our initial capitalization in 2011 and will now move to grow the platform to even greater heights with WCPI as our financial partner. The APF management team will be forever grateful to Chuck Davis and his investment team at Stone Point for their forward-looking and pioneering rational when earmarking the initial 2011 investment. Our new partners at WCPI share our passion for integrity as well as verifiable results driven by operating partners with a 25 year track record of risk adjusted returns.”
The successful transaction was another in a series of wins for Wright and his team - the result of hard work that began attracting notice some time ago. Last year, when Wright first learned his company had been named the 17th fastest growing private company in the country for 2015, by Inc. magazine, he was both humbled and gratified for the honor. “It’s extremely important to me that the management team receives the recognition that they deserve when such well-regarded counter party assessment as Inc. Magazine determines such results,” he said. Ranked number 17 nationally by Inc. 500, APF had surpassed such well known Atlanta “unicorns,” such as Kabbage and Cardlytics (they were number two and number three respectively) when measured as a “metro” vs nationwide stratification.
Born and raised in the college town of Fayetteville, Arkansas, Wright was one of two sons of post grad educators (Library Science and Musician). “My mother earned a Masters in Library Science, after herding my brother and me to lower school, and my father was a brilliant musician who taught music in the high school, church and University of Arkansas as well as providing in-home and private instruction all at the same time,” he sa.id “Growing up, my entire existence consisted of sports, music and church.” His father handed him a guitar at age fifteen, informing him that, “the gals will be able to see you better without that helmet on your head,” (after suffering a spinal injury, which ended his football aspirations). He now likes to live vicariously through his son, Luke, who is currently a quarterback for the University of Kentucky and his daughter, Kate, “who sings like an angel and is academically light-years ahead of my GPA down the road at the University of Alabama.”
As a pre-teen, Wright worked as a vendor at Razorback Stadium on game days selling Cokes and kept a steady lawn care business which was his means to pay for his first car. During high school and college he worked at the local mall (Sears) from 5:00pm – 9:00pm. “I was always doing something. I was compelled to stay busy, it was in my DNA,” he said, “and I knew one day I wanted to run my own business, and in order to get ahead, I would have to work harder than others to accomplish those goals.” At Sears, he was soon promoted to the electronic and automotive departments, where he was compensated primarily by commission on gross sales. He was mesmerized by the fact his income had surpassed that of most recent college graduates or those serving the public sector, (part-time no doubt).
For college, Wright decided to remain in Fayetteville and attend the University of Arkansas. He joined the Sigma Nu fraternity. “I liked the idea of joining a fraternity and instantly meeting roughly a hundred new frat brothers, but unfortunately, couldn’t afford the full tab or so I thought. My parents termed it ‘Sigma Sin’ and made sure I was aware that all financial obligations were on my shoulders. A couple of the older brothers/officers suggested that I work part time to help with the landscaping for relief of monthly dues. I mowed the lawn and assisted the gardening crews for two years while also maintaining my 5:00-9:00 shift at Sears,” said Wright, “more importantly, I swallowed a lot of pride.”
In the meantime, Jon’s older brother, Mark, was fully entrenched into the Nashville scene, producing artists such as Clint Black, (who he found in a Houston honky tonk and later produced his first album and now has 50 number ones either written or produced). Interested in the music business himself, and being best friends with his brother (only sibling), Wright travelled to Nashville after his college graduation with the intent of working in marketing and public relations. “I was nervous, yet excited, and then even more thrilled when Mark said that he had found a job for me, recruiting new artists for BMI (one of the largest music rights companies in the world).” Then Wright learned the reality of starting out in the music business; he was only going to make $400 per month. “I loved music, and I loved my brother even more for helping me out,” Wright stated. His brother made some great arguments about how this BMI gig was just the beginning, and that most folks did the work for free, just to break into the business. But Wright realized he didn’t love it enough to work for free and that he could still hang out with Mark afterhours and “socialize” in the “biz.”
Instead, Jon accepted an offer from Pitney Bowes, where he worked in its sales and finance division, followed by corporate real estate and ABS financing for Ford’s commercial ABS leasing division. In 1988, he was recruited to Holiday Inn Worldwide in Memphis to work for its Real Estate financing arm.
“Fortuitous timing for me, indeed, launched my career in commercial real estate and specifically the hotel financing business. I was blessed to meet the first generation of hotel developers. Most of them were in their sunset years, and were in the process of successfully passing their investments to the next generation. I got to know them intently and learned a lot from them.” What was most surprising to Jon was how easily he got along with these businessmen away from the nuts & bolts of business. “I found that they were similar to the people I knew in the entertainment business. It takes a charismatic individual to break into the music industry, but it also takes a charismatic person to get ’heads into beds’ every night in the hotel industry. “We got along splendidly. A lot of them had garage band mentalities, working hard to do just that little bit more to impress the audience. They had amazing passion for work and family.”
At that point in time, UK-based Bass PLC (Bass Ale) bought Holiday Inn brands and kept the financing arm that he eventually led (whilst Bass promptly moved the company to Atlanta in 1990.) Thus Wright moved to Atlanta with his then girlfriend and found that he loved Buckhead/Atlanta more than a committed relationship. “She was homesick, and our plans changed 360, so we promptly and civilly broke up.”
The break up actually inspired him to write a country song, “Going through the Big D” (Don’t Mean Dallas).” Wright’s brother, Mark, co-wrote the song and produced it with Mark Chestnutt recording it. The song went to number two on the Billboard Country chart and number one on Radio and Records Charting Service. “The song ended up being a humorous look at a tough situation,” said Wright, “and while it was very satisfying to write a hit song, it also helped me impress my future wife, Paige.” Now married for 23 years, Wright shared, “We met at a hotel convention. She was similarly employed by a specialty lender based in Dallas. She knew the business and the key players very well. And although Paige hung her ‘cleats” up to raise our children, I still continue to lean on her expertise daily to provide HR (Home Resources) feedback, which as any businessman understands can clearly benefit mental well-being as a sounding board,
In 1997, Wright was recruited to leave Holiday Inn to launch a new hotel financing unit for GMAC. He was recruited by one of the top finance managers at GM, who was a mentor then and is still today as well as a current Board Member, because he knew Wright had been successfully making hundreds of loans during his ten years at Holiday Inn. Now he could make loans to the entire hotel industry (not just Holiday Inn hotels). He would literally be starting from scratch and taking a fifty percent pay cut. But he had great upside potential as a Jr partner if the new venture was successful growing to $4 billion of assets. “And we were successful,” he stated.
In 2005, GM found itself in financial trouble and Wright ended up selling his division at a profit when the unit was purchased by an Atlanta-based banking consortium, yet after a fantastic fouryear stint and roughly $2 billion of loans, the parent bank had problems of its own, ended up being closed and placed in receivership by the FDIC in 2009. Wright’ss unit, though still highly profitable, was now owned by the FDIC and remained open and operational for the next two years. Wright found an entity that would buy his unit from the receivership for a premium when the parent company shuttered, however, “the FDIC was a tad bureaucratic, to say the least,” and could not get the FDIC to act fast enough on a stellar Wall Street proposal. Two years later, Blackstone bought the bulk of the unit’s assets for eighty-two cents on the dollar, which he says was still the highest value obtained by the FDIC for the bulk sale of assets in receivership.
By 2011, Wright exited the receivership entity owned by the FDIC and formulated his next steps. The big decision that he had to make was whether or not to start all over again. He was very fortunate that his corporate insurance (Director and Officer, Errors and Omissions) coverage was in force and available from his insurer. He never had a lender liability claim in all his years in business – but to keep his policies in effect he would have to pay the six figure premium out of pocket.
“I knew without a doubt that our team was the best in our space” he said, “so it ended up being one of those hard decisions that was easy to make. I covered the premium, subsequent start-up costs and overhead out of my own pocket and got back to work sourcing recapitalization via the Private Equity Funding.”
Wright closed the recap with a well-regarded private equity firm (Stone Point Capital) for funding the enterprise within forty-five days, initially utilizing $50 million of the overall commitment of $250 million (most likely the largest equity raise of 2011) and Access Point Financial was born. He rented office space for the team and bought furniture from the FDIC for ten cents on the dollar. “I told the landlord to leave our space ‘as is’. We were ready to go, and I had a great management team in place. My CFO, COO and the balance of the management team had been with me for over a dozen years, long enough to know they were passionate to keep moving forward as well.”
Starting over in 2011, business was a bit slow at first. “The volume and velocity of transactions was not there,” Wright said. “Customers seemed to be frozen by the hangover from the financial crisis. The good news during this time was that we had a long-standing relationship with Wells Fargo, which joined again as a debt partner.”
“Our biggest milestone came when I was able to tell the team that we had broken even and then in the black making a profit of $100,000 for the month. We celebrated briefly and immediately got back to work,” Wright said. “The profits each month continued to mount, and in 2016 Access Pointearned record revenues. That’s why we had such a high ranking on the Inc. 500 magazine list I suppose.” In five years, the company has lent on 550 assets (with $3.5 billion in asset valuation) and has combined debt/equity of more than $1 billion. Access Point makes hotel loans that range from $250,000-$25 million. It makes bridge loans with capital improvements included.
The company’s expertise makes the loans they originate quite liquid since they are so well respected in the financial market place. “One thing that I’m very proud of is that we recently produced the first hotel only asset backed security and is ’A’ rated by two agencies. We have a stable of well-regarded Investors who appreciate the quality, velocity and integrity of our product delivery and the fact we remain as principal in all executions.” APF issued “A” rated securities and increased its stable of bank leverage partners to include JP Morgan, Key Bank, East West Bank and several other world class banks.
Due to their success, (which Wright always credits to his management team) banks are especially interested in APF because its loyal customer rapport of high net worth. Cross-selling financial products to such individuals is very important to banks today, so at least one path to a major liquidity event is clear for the company.
When time came for the recap, Wright and his team first analysed a list of 100 investment banks, then narrowed it down to a list of 20 to meet in person. Early on, WCP seemed like a good fit. “They had already been doing some specialty lending,” said Wright, “and they made clear that they would take an autonomous approach to management. It also helped that they liked our innovative lending efforts.” The company will have a lending budget of more than $6 billion over the next three years.
“This transaction provides a platform for us to grow in the future,” said Wright. “We may start doing SBA lending. We will also look at additional asset classes. However, whatever we do will stay within the confines of our current client universe – our hotel owning customers.”
“Most important of all, we will continue to have a high touch client experience.”