Benefiting from the Travel Rebound – Learning From the Past: What Historical Performance Predicts for Business Select Hotels

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Q&A from the Webinar:

Q: Will all the hotels sell at the same time, meaning will you sell them individually or as a portfolio, like to a private equity firm?

Our intention is to sell the properties as a portfolio. However, it is dependent upon the maximum return to our Investors. If selling individually is the best route, we will pursue that. 

Q: Is buying hotels today still at Covid depressed pricing? If so, why?

Yes. Hotel Valuation is based on Trailing-12 NOI, so we’re still seeing COVID effects from 2021. This also depends on the type of hotel, we are seeing a quicker recovery in select-service assets. It will not stay like this forever, so now is the time to acquire, before the industry fully recovers. Once that recovery sets in across the board, valuation (and therefore prices) will increase back to pre-pandemic levels and higher. Remember, our model is “buy low, sell high”. 

Q: Do you have a pipeline of hotels to purchase or as you get more funding do you need to find more opportunities that meet your criteria?

Yes, we have a robust pipeline of hotels we are considering for this portfolio. We find new acquisition opportunities EVERY DAY. We filter from a large selection of hotels on and off-market. However, we stay true to our acquisition criteria; it has served as well over the years. 

Q: I know that this investment is for 2 to 3 years but is it possible to get our money back anytime if we want to?

No, this is a non-traded REIT and the 8% dividend reflects the longer time frame of holding this investment. However, under special circumstances an exception may be granted by the manager. A common example could be unfortunate medical expenses. 

Q: Can I invest with an LLC and if so what are the requirements?

Yes, EIN and formation documents. 

Q: Who are the anticipated buyers in the future?

Hotel Ownership / Management groups like ourselves (both small and large), as well as Hospitality REITs, Institutional Investors like Blackstone, pension funds and insurance companies. 

Q: What is the average amount of money most investors submit?

As of today, I would say our average investment is north of $100,000. 

Q: What happens in a recession?

This is a benefit of owning a hotel(s). We have the ability to contract and expand expenses (excluding fixed costs) to adjust to market conditions. The same is true on revenue; we can employ an aggressive pricing strategy to ensure we maintain our market share. 

Q: What is your actual % cash distribution in the past?

In the 4th quarter we paid out a 15.9% annualized distribution. 

Q: What is the net investor equity multiple?

That is a figure used in commercial real estate. Unlike commercial real estate, hospitality does not have fixed long-term leases. Rates can be changed daily, weekly, monthly, even hourly! This offering also provides equity participation to our shareholders upon the sale of the hotels on the back end. 

Q: What is your hold period?

Originally, we anticipated that it would be 3-5 years. However, now in the 2nd quarter, we have seen an acceleration of the recovery. We believe it’s now potentially a 2 to 3 year hold. 

Q: Can we get our money back anytime?

This is a non-traded REIT and there are no redemption clauses during the operational phase of the offering. We anticipate the hold time before selling the acquired hotels will be 3-5 years. However, under special circumstances an exception may be granted by the manager. A common example could be unfortunate medical expenses. 

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