2. Criteria for Hotel
Investment
Decision
• Positive Cash Flow from
operations
• Appreciation in property value
• Invest at or below
replacement cost
• Cap Rate above 8%
• 10 year investment
4. The Angler’s
• Located on Washington Avenue (& 6
th
Street) in South Beach
• Close access to beach and Ocean Drive (Demand
Generator)
• Built in 1930s with 2 Buildings, and refurbished in 2005
• 48 Units - All Suites (P&L says 45)
• 133 Total Units – Planned for new resort including adjacent
project
• Parking with up to 62 spaces + Second Pool + 5,000 Sq.
Ft. Rental Space
• Upper Upscale with Luxury Flag (IHG) + Keeping the Resort Name
• Full Service Restaurant & Bar (Serving 133 Units)
• Equity Partnership: Contribution $13,000,000
• Outstanding Debt $14.5 Million + $10 Million USD from New Loan
• $45 Million USD projected Value of combined properties
Asset Analysis
5. The Angler’s
• Miami Beach very popular (Demand Generator)
• Occupancy in SoBe
• (2009 - 65.89% ➤ 2014 – 76.36%)
• ADR in SoBe
• (2009 - $181.13 ➤ 2014 - $254.90)
• RevPAR in SoBe
• (2009 - $119.35 ➤ 2014 - $194.65)
• PKF Forecast for Miami RevPAR Growth from 2014 to 2018
• Demand is increasing faster than supply
• STR:
• 21 Hotels in the Pipeline (Including Refurbished Properties)
• Many Properties being converted or rebuilt “previously abandoned”
• Extreme Competition in the Upscale to Luxury (STR Scale Segments)
• Competitive Set: Almost all Independent + Crown Plaza (IHG too)
• Market includes very large number of independent properties
• Expansion needed to achieve economies of scale (Competition)
Market Analysis
6. The Angler’s
• As of April 2012, Hotel had the following Year-to-Date Data:
• Property:
Occ. 73.6% - ADR $245.03 - RevPAR $180.43
• Market:
Occ. 75.4% - ADR $219.92 - RevPAR $165.87
• Compared to Competitive Set, hotel is ahead (with 45 Units only)
• Considered an Upper Upscale Property (STR Scale Segment)
• Contract over 20,473 Sq. Ft. Parcel for $5,100,000 USD
• Loan for $14,500,000 needs to be refinanced
• Bank: Which bank and conditions (rate & term)?
• Actual Cap Rate ($700,000 / $14,500,000) = 4.8% (Undefined)
• Project needs cash injection ($13 Million Cash) Non-Financeable
• New loan plus refinancing existing one (Bank? Board
Members?)
Financial Analysis
7. The Angler’s
Favorable
• South Beach Hotel Supply is growing, but space is limited
• Renovation Candidate: Value added opportunity
• Hotel is expected to increase RevPAR, although with new project
• Net Operating Margin at 18% vs. 25.9% Host (2012 Forecast)
Unfavorable
• Complex to calculate a Capitalization Rate (Price includes New Project)
• Pipeline
• Projected opening of Phase 2
• F&B performance
Further Investigation
• Terms of the loans
• Management Agreements
• Replacement cost
Verdict
• Property is a risky investment for our client
Cost vs Benefits
8. Comfort Suites - Atlanta Airport
• Atlanta Airport keeps growing (World Busiest Airport)
• Newest property in the Competitive Set (New Building)
• Demand is increasing faster than Supply
• Occupancy in ATL (2009 - 61.02% ➤ 2014 - 71.59%)
• ADR in ATL (2009 - $76.34 ➤ 2014 - $82.89)
• RevPAR in ATL (2009 - $46.58 ➤ 2014 - $59.34)
• PKF Forecast for ATL ➤ RevPAR Growth from 2014 to 2018
• Only 2 hotels in the Pipeline (1 in same category) for ATL Airport
• Holiday Inn Express & Renaissance
• Competitive Set includes properties in different STR Scale
Segments
• Hyatt Place (Upscale), La Quinta Inn & Quality Inn
(Midscale)
• Fairfield Inn, Country Inn & Comfort Inn (Upper
Midscale)
Market Analysis
9. Comfort Suites - Atlanta Airport
• Located in the South East part of Atlanta Airport (ATL)
• Close access to the International Terminal (Demand
Generator)
• Built in 2009 on 1.78 Acres and 5 floors & refurbished in 2013
• 81 Units - All Suites with Interior Corridor
• 82 in the floor plan & 79 on STR with 2 rooms removed
• Upper Midscale Flag (Choice Hotels)
• Full Service Restaurant & Bar and 78 parking spots (Park &
Fly)
• In-door swimming pool + Gym + Meeting Space (1424 Sq.
Ft.)
• Price: $6,800,000 (With SBA Loan of $5,600,000)
• $83,950 per Unit with $1,200,000 Down Payment
Asset Analysis
10. Comfort Suites - Atlanta Airport
• As of December 2013, Hotel had the following Year-to-Date Data:
• Property:
Occ. 66.4% - ADR $67.62 - RevPAR $44.94
• Comp Set:
Occ. 67.1% - ADR $63.93 - RevPAR $42.88
• Midscale Chains:
Occ. 63.4% - ADR $68.36 - RevPAR $43.32
• Compared to Tract Scale and Competitive Set, hotel is ahead
• Potential to increase NOI and its Positive Cash Flow
• SBA Loan for $5,600,000 and 1% fee
• Type: 7(a) or 504?
• Bank: Which bank and conditions (rate & term)
• Can loan be cancelled with only 1% fee as penalty?
• Capitalization Rate
• ($588,142 / $6,800,000) = 8.6% (Acceptable)
Financial Analysis
11. Comfort Suites - Atlanta Airport
Favorable
• Stabilized Candidate
• Atlanta Airport Hotel Supply is not growing
• Hotel is expected to increase RevPAR for the coming years
• Cap Rate of 8.6% with positive cash flow (with our debt terms)
Unfavorable
• Property has less than 100 rooms
• Includes Full Service Bar & Restaurant with Upper Midscale Flag (?)
Further Investigation:
• Terms of the SBA Loan with 1% fee (Rate? Term?)
• Can franchise agreement be terminated? Restaurant numbers?
• Total Revenues, Need to compare Net Operating Margin (P&L)
Verdict:
• Property seems like good investment in an attractive market
• More information needed, should be considered a buying candidate
Cost vs Benefits
