Fair professional investment decision in advance of corona virus? Thoughts from much more seasoned users – Score: 2

6 thoughts on “Fair professional investment decision in advance of corona virus? Thoughts from much more seasoned users – Score: 2”

  1. I spent a ton of time doing distressed hotels earlier in my career. (1) t12 hotel NOI iS BS, you need to look at booking curve (pace reports). Given this is a BW in middle of nowhere it’s probably mostly 45 day transient business. I don’t see any reference to group facilities which sucks because you can’t get rate compression without group bookings. (2) BW will 100% PIP you when you buy it. What’s the scope for a new BW PIP? What will it cost? (3) I don’t have to get a PCA to tell you that fucker is full of mold. Mold loves VWC in bathrooms and ice rooms of shitty old hotels. But an environmental insurance policy, worth its weight in gold. (4) how much time is left on the franchise agreement (back to point 2)? Are you at the end of it and BW won’t renew because you’re an old gen hotel that they’re phasing out? Will you end up with an unbranded low-ADR hotel where people go to smoke meth with their paid for lady friends? (5) what are the demand drivers for leisure / transient? Can’t tell what they are.

    Hard pass, ton of work for not a lot of money and lots and lots of risk. Oh an good luck getting a loan for a hotel right now it would have been tough as a first time operator impossible now that we’re in COVID and every lender and their cousin is trying to dump hospitality loans off their books.

    Hard pass, my $0.002

    Edit – also just saw you’re assuming you can get 75% LTC, not happening right now for hotels unless you’re like pledging your first born with a full recourse guarantee

    Edit 2 – also to add to hit the NOI guidance listed you’d need REVPAR of like $55 which based off of their current list rates implies an occupancy of 70%. I don’t know about you but i wouldn’t make the bet that I can sell 40 rooms a night every night all year long in Del Rio, Texas. No dining facilities / ancillary revenue so you need to make it all up on the nightly sales.

  2. Hopefully someone will chime in with more hotel experience than myself, but what is the NOI over the last 6 months? A hotel located near an airport is unlikely to be doing well during COVID so I doubt it is a 19% cap on recent performance. Once you have current NOI, I’d talk to a lender as that will heavily impact loan proceeds.

    A 19% cap on loopnet that has been posted for 5 months flashes a lot of warning signs in my mind, but take it with a grain of salt as I’m not a hotel guy.

  3. A true 19.12 cap rate is amazing. Review the financials, you’ll find out that this is probably not the case.

    Also, LoopNet is very bad about keeping their searches up to date, I would also confirm to see if this is still available.

  4. Hospitality is one of those property types where buying them is a lot more like buying a business than buying a building. I wouldn’t want to get into a business I know nothing about right now. Returns are going to be lower in more “hands-off” property types, but you’re way less likely to lose your shirt, too.

  5. Willing to help in anyway. If you didn’t notice by my username , but my group owns limited service hotels. It’s a great asset class and the returns are very attractive if run efficiently. Some of the comments above are correct. The biggest piece to buying hotels is to understand the franchise model. One minute your on top of the world and the next your hilton is a motel 6 doing half the business you used to do. PM me if you want more details, always willing to help those looking learn.

  6. Hotel Broker here… This property is listed with my firm (Marcus & Millichap). I’m happy to answer specific questions via private message.

Comments are closed.