Becoming an Investor?
Our strategy involves acquiring only seasoned, successful premium-branded hotel properties that can generate our targeted returns. Focusing exclusively on the State of Florida – one of the nation’s most desirable hospitality markets, we can invest in hotels that maintain a consistent stream of revenue, bringing you properties with positive cash flow on day one. We bring pre-existing, up to date properties to you to avoid construction and development risks of new, ground-up projects, while having assembled one of the most experienced and dedicated hotel owner/operator teams in the industry. Our acquisitions qualify for long-term, fixed-rate, non-recourse debt at the most attractive rates with some of the strongest elements for stable, increasing cash flows and capital appreciation.
There is a very defined group of proven hotel brands (flags) that historically generate reliable cash flows along with providing “value” and protection of invested capital We are focusing exclusively on upper midscale brands from Marriott, Hilton and InterContinental Hotel Group (IHG). Examples of these best in class brands include Fairfield Inn, Hampton Inn, Holiday Inn Express, Residence Inn, Homewood Suites and Staybridge Suites. These brands have proven to be the most successful, along with being the most recession-proof, within the lodging sector. These brands also have extremely popular customer reward programs (i.e. Marriott’s Bonvoy, Hilton’s Honors and IGG’s Rewards Club) that provide a steady flow of business, especially from business travelers.
The primary driver of a local economy is population inflow and job creation. This, coupled with a very favorable tax structure and a business-friendly environment, puts Florida in the top position for long-term hospitality investments. Florida is now the 3rd most populous state in the nation and continues to demonstrate consistent population growth.
We believe that acquiring existing hospitality assets makes more sense than developing new properties. Existing assets have a “known location” value and “refresh” improvements can be made with minimal dollars versus the cost and risk of new development. Acquisitions also avoid the long development, construction, and ramp-up cycle of all-new ground-up projects, generate immediate cash flows, and produce a significant return on capital invested. Existing assets, particularly in high barrier to entry markets that are frequently found in the State of Florida, usually have far superior locations to new development. Our management team will be able to bring value through the rebranding of select older properties with more upscale and relevant brands.
We also intend to focus on hotels that are due for a Property Improvement Plan (PIP). Hotel chains require their franchisees to regularly invest significant monies into their properties to maintain a fresh, brand-mandated image. Many hotels that were bought by “financial” investors just post the Great Recession are now due for major PIPs. Managing and implementing a PIP is a complex process and many financial investors are not experienced or staffed for this work. Accordingly, financial investors are often inclined to sell their properties rather than go through the PIP process. Our management team is very experienced in the PIP process. We see this as a skill set that gives us a unique advantage in acquisitions.
We expect to utilize long-term, non-recourse debt, with expected leverage levels to not exceed 75% realized loan-to-cost allowing us to take advantage of historically low-interest rates. More importantly, we will underwrite to very conservative debt service coverage levels after establishing very realistic capital reserves. Between the CMBS market and the more traditional sources for long-term financing (pensions funds and life insurance companies), we are confident that we will be able to source very compelling long-term financing.
We anticipate that the life-of-deal return will be driven by current cash flow and incremental capital appreciation. Given that we are focusing on premier assets in proven locations with a dominant brand, we believe consistent returns with much lower risk can be achieved.
We believe our geographic focus gives us a strong ability to better weather occasional economic downturns. People still vacation in Florida, no matter the economy, and they want to stay at the “right” hotel in the “right” location. Our targeted properties, being premier upscale select-service brands, have historically been the preferred choice of vacation and business travelers for decades. While it is somewhat challenging to determine the exact reason for a hotel failure, we have compiled data from various third-party sources and have been able to extrapolate an average failure rate of less than 1.0% for premium, nationally branded properties – our target market.
Investment offerings are only suitable for “Accredited Investors”, further defined in our