1/56 SomeHotelGuy’s take on Sonder. Quick disclaimer – I have nothing to do with Sonder, I’m not particularly smart, and I’m in no way a securities analyst. This isn’t investment advice.
1/35 Ok, so by popular request, a quick desktop look at this potential hotel redevelopment found by
@harrisonfinberg
. I'm skipping some steps that either don't lend themselves to narrative or are the artistic flourish of underwriting.
Going to walk you all through my back-of-napkin on a currently listed property, thanks to our friend
@moseskagan
!
The Property: A 27-room motor lodge in LA’s Thai Town listed for sale for a whopping $11.28MM ($418K per key). The Harvard House Hotel at 5251 Hollywood Blvd.
Going to kick of
#HotelTwit
with a running glossary of terms. I’ll keep adding as we go, and keep pinned on my profile. If you have requests for add’l terms, just drop ‘em in the thread!
Anybody else find that the minute you’re about to go on vacation every single deal suddenly goes from cold to hot? And does this mean I should be planning way more vacations?
A small bio: I’ve been involved in over $1B of hotel real estate deals, and probably underwritten at least 2x. Been on this side of the biz for ~10 years. TONS of people smarter than me doing this every day. Hoping my posts will drive discussion, and that I learn something too
We lose deals to other pros every day who have cheaper capital, a more optimistic view of the asset / market, a business plan angle we missed, a higher tolerance for brain damage on that asset, or are just itchier to buy. Sometimes we’re glad we lost, sometimes we feel dumb 🤷♂️
1/ If you’re looking to build (or buy) a hotel, you’ll need to project revenues for at least 5 years from opening. Here’s how I do it.
First - look at local competitors and determine the most comparable hotels.
It’s
@somehotelguy
’s first New Development thread, “On Guestrooms and Guestroom Bathrooms”:
First an apology – I don’t have a library of floorplans I can post from like
@bobbyfijan
, so this won’t be anywhere near as informative or cool as his threads.
Everybody - if I did a bunch of threads on hotel specific new development, what would you want to see?
I’d be able to speak from the investor and brand perspective, not from the architect, GC, PM, or any of those actual smart people perspectives
The hubris on
#retwit
and
#smbtwit
sometimes still catches me amazed…
I promise - being good at one thing in one industry doesn’t make you good at everything
Next up in the
#HotelTwit
series is an intro to the P+L!
Every operating co has their own format, so I’ll show you a representative example (with no
#s
) and also an example of how I like to look at it (with fake
#s
)
Pass. It’s priced like a development site, and that’s likely the best outcome for it. This exact same deal in Beverly Hills, WeHo, or even DTLA (well, maybe)? My DMs are open, and I pay good commissions...
So, been putting together a list of hotel-investment-specific tweets (mostly acquisition or asset management focused), as well as a list of hotels I love. Planning a few tweets a day starting Monday. Any requests? Should I do some “hotel underwriting for beginners” stuff too?
1/ Since
#RETwit
has been abuzz w/ Cost Segmentation, I thought I’d talk about Revenue Segmentation in hotels... exciting, right? I’ll tie into acquisition underwriting at the end. MONSTER THREAD AHEAD!
Hotels segment rooms revenues by type of reservation.
This could be a long thread, but I’ll keep it brief. I:
- can’t do mental math
- consistently struggle w/ impostor syndrome, despite knowing intellectually that I’m not faking it (usually)
- need to force myself to follow up / “just calling to say hi”; it doesn’t come naturally
As I get ready to ramp up the
#HotelTwit
content, I’d love to post more desktop acquisition analysis
Any brokers willing to step up and submit deals? I’ll gladly anonymize the property & round numbers so it’s not easily identifiable
If it’s a good deal, I may be your buyer!
A reason I love hotels:
On the phone with a corporate Vice President who got his start as a housekeeper
We’re an industry where true mobility is still available to folks who want to build a career
From the ‘died in DD’ files:
Looking at a Resi Inn, and trying to figure out what the Lease Expense is, since whole thing is fee simple
Get to digging in & turns out all the guest room kitchen equipment was being leased by the property from an entity controlled by the GP
Got a few hours to kill on a flight tomorrow. What do you all want to see a thread on, hotel-investment-related?
Also, seem to have hit 2K followers, and wow. Still amazed you find any of this interesting at all. Thank you!!
I’m thankful for a great many people, but given this account…
I’m truly thankful for the folks out there taking care of other people’s families today
Your kindness, hospitality, and hard work make the world a better place
Thank You
Ok
#HotelTwit
, let’s talk benchmarking! We’ll look at each department from the Summary P+L and talk about how we compare it to like hotels, and why. This’ll get us to be able to do a “quick & dirty” proforma, which we’ll do for a real hotel next week
On a plane drinking a beer, listening to the 2/18/71 Grateful Dead show at the Capitol Theater in Port Chester, NY, and doing old NYT crossword puzzles
AMA 🤷♂️
1/ Breaking into any new industry, the jargon can be the hardest part.
So... Let’s talk hotel classifications for you budding hoteliers out there! There are a lot of terms that get used to describe hotels within the industry, and while some have fixed definitions others don’t.
Kid’s napping so peeked at LoopNet and - holy f*ck - people actually buy these deals?!?!
$114K / key for dirt - dirt - on which a Comfort Inn is approved to be built? A Comfort f*cking Inn?!?!
I’m thankful for a great many people, but given this account…
I’m truly thankful for the folks out there taking care of other people’s families today
Your kindness, hospitality, and hard work make the world a better place
Thank You
Sitting at a bar next to a date where a 40+ year old man spent 10 solid mins talking about his youth hockey experience (“I’ll never forget, in 8th grade…”) and that was one of the less stupid monologues. The literal height of comedy. I’m DYING
I asked
@Giannis_An34
if Oreos and milk are on the Thanksgiving menu. His response was 2 minutes long.
"From now on, that's an every night snack for me."
As one of the OGs (Original Guys), I’d just like to say, for the record:
If anyone wants to send me $$ based on the (mostly dumb) things I’ve posted
DM for wiring instructions
1/ So, how are hotel management agreements structured? Caveat – this is based on my experience, which tends towards the more institutional assets; if you’re looking at doing a 30-room inn, this may not apply.
Sitting down with
@realEstateTrent
today was amazing. I have literally never met someone more knowledgeable about retail, and I learned an absolute ton. Also, super nice guy!!!
Met
@somehotelguy
this morning for coffee.
He knows the ins and outs of the hotel industry like the back of his hand.
Even ran a full analysis of one of our sites in his head without even a calculator.
Brilliant real estate mind, and a good dude.
Hearing that lender appraisal work on hotels is picking up. That would lead me to believe the heretofore unrealized “wave of foreclosures” may actually happen. No more “extend and pretend” if you actually know the value of the asset
@EllliotttB
A good comp may be Courtyard. In 2019, there were 717 mature, franchised CYs in the US. They did an average RevPAR of $101.30. Average size is something around 125 keys. That’s $3.3B in Rooms Rev. I think Sounder’s all rooms. So, Sonder is gonna be bigger than CY by 2025?
Haven’t talked much about new development to this point, but it’s been a big part of my career. Was thinking I’d run through some hotel specific new dev topics over the next few weeks… here’s what I’ve got so far, & I’d love suggestions! I’ll probably reup this a few times also
When working a hotel acquisition, talk to as many people as your confi will allow! Not just the broker, but the analyst the broker has putting the package together. Talk to the GM when you tour, asking a ton of Q’s. etc...
@CREbrokerSoCal
I’m one of those principals. Have had at least half a dozen occasions where I was already talking directly to the owner of that “off market” property, and dozens where I got the same “off market” property sent by 3+ brokers in the same week
#CMBX
6 Hotel Valuation Cut By 65%
Gansevoort Park Ave received a two year modification and a new appraisal of $98mm, down from $278mm in 2012. The Hotel backs $124mm of
#CMBS
debt split between CGCMT 2012-GC8 and GSMS 2012-GCJ9. DSCR hasn’t been above 1.0 since 2015.
@TreppWire
34/ The minute you need to fix an elevator, replace a chiller, or redo a bathroom? There goes the budget.
Moral of the story? This is a
@RaphaelKahan
$1 special unless you can create a PROFITABLE restaurant operation or actually pull a $150 RevPAR (Occ x ADR).
1/8 On Due Diligence - a multi day thread:
When pursuing a new hotel acquisition with a capital partner, I do my best to identify and box in risks as part of a rigorous due diligence process.
“Some people dabble in fine art. Others in cocaine. You should NOT dabble in hotels”
If you were in the same room as me when that was said yesterday, shoot me a DM 😂
Just wrapped up with
@fortworthchris
- it was an honor and a delight to join him, and I promise I’ll be better next time! We had a great conversation about the hotel industry, and I tried not to talk my book too much. Hope you all enjoy it & subscribe to Chris’s podcast!!
A small tip for non-specialist CRE brokers marketing hotels…
We go by property name, not address
I have no clue off the top of my head what “700 5th Ave” is, but I damn sure know The Peninsula
(not the hotel that precipitated the tweet; it was much more “middle of nowhere”)
Ok, some thoughts on the drama:
1. Very glad nobody got scammed (I think?)
2. Would be so much funnier if someone got scammed
3. “it’s all media, you’re all selling something” is nihilistic BS
4. B/c of 3, I’m out on this guy
5. Nobody’s asked for wiring instructions yet 😢
The just completed Americas Lodging Investment Summit (ALIS), in a single tweet:
Operating Fundamentals? 🥰
Debt Availability? 🥴
Transaction Markets? 🤢
How I Feel? 😴
Worked in an office for the first time since early March. It was amazing. Felt safe, was productive, and best of all - wasn’t lonely! Looking forward to doing it again tomorrow
A heartfelt “thank you” to the service workers - (selfishly) especially to hoteliers on property today - working on this holiday
You sacrifice your holiday to care for others, and for that I am truly thankful
Shed a few tears reading this. Many will remember him as a great strategic leader. I’ll remember him as warm, kind, and human - very rare qualities in people generally, let alone major corp CEOs. My thoughts are with his family and friends.
Just left a meeting where I was on the wrong side of “do you want to be right or do you want to make money” and I’m pretty damn pissed at myself… didn’t realize it until after I’d done it, and normally I know better
Your periodic reminder that being good at / smart about one thing does not make you so about everything
Intellectual humility is something I learned as I aged, & is something a whole lot of
#ReTwit
/
#SMBTwit
/
#FinTwit
would do well to remember
22 year old me was insufferable
When we underwrite a new acquisition, one area our analysts often under-think is Exit - a pretty damn important area to total returns!
What do I find they often miss? The Buyer’s business plan
As someone in real estate, I'm always blown away when I see a hotel executing on all levels.
So many workers, so many processes, so many details.
It's pretty remarkable when done right. It's good to see hotels rocking and rolling again.
Cheers to the hotel industry.
Make sure to read vendor contracts - all of them - every time you buy a hotel. 95% of the time there’s nothing to worry about, but 5% you’ll see some weird / crazy / deal-changing stuff!
America has over 100,000 hotels and motels.
My family owns 2 of them. They came here with nothing, now they are millionaires.
How did they do it?
Worked like dogs for 22 YEARS.
Lived modestly. Never racked up credit card debt. Understood that leasing a car is great way to
Ok - gonna get back into the posting game. Got a few ideas lined up, but want to hear from you:
What do you want to hear about when it comes to hotel acquisitions / development / operations?
Also; on a plane and baby is sleeping, so for an indeterminate period, AMA about hotels
When buying a hotel, don’t skimp on the Property Conditions Report &, if possible, tour w/ someone from your manager’s engineering department. Finding physical issues in DD helps you make an informed decision whether or not to move forward & impacts your biz plan meaningfully
Quick take:
Been a weird recovery - both top down (luxury leisure) & bottom up (economy & midscale, aka Wyndham).
This RevPAR beat shows ppl who must travel are, smaller co’s are, etc
When small co’s hustle, big must respond. Corp travel will be back. Long hotels, baby, yeah!
BREAKING:
@WyndhamHotels
reports Q4 profit of $48 million, but the real win is its revenue per available room (industry's key performance metric): U.S. RevPAR exceeded pre-pandemic levels by 8%, Global RevPAR fully recovered in Q4 and was at 97% for all of 2021.
Multi developers - please do lots of these!! And old properties with big guest rooms and wide hallways!
Signed,
A guy who believes the hotel market is under demolished rather than over built
Like the hotel to multi conversion space a lot. We are currently working on equity and debt for 4 of these deals ($200MM+ total capitalization). Big things to think about are entitlements and conversion costs.
via
@triadbizjournal
We generally invest from discretionary funds but will occasionally pitch others on our deals; institutional capital partners as LPs or institutional owners for us to act as a 3rd party operator (lenders are a whole other ballgame).
These are the deals in which I learn the most.
Next up in the
@somehotelguy
series on new development… Facilities Programming!! As always, stream of consciousness (a.k.a., long).
Here we’ll talk about an incredibly iterative process – how you figure out just what you should build when you’re looking at a hotel site.
Got pitched on investing in a Forbes 5-diamond level hotel development stabilizing at 50%+ NOI margins that “will be valued at [$2.5MM/key] upon stabilization”
As you might expect, I’m somewhat skeptical…
Heard this one today… union operated hotel in a high ADR leisure market (not luxury product either) asking a 5.2% cap on 2019. For the leasehold interest. For the leasehold interest.