VOCO Sandcastle Oceanfront Resort
Myrtle Beach, SC – Renovation/Rebranding
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John Haltmaier | Managing Director | |
jhaltmaier@castleplacement.com | |
(973) 699-7995
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https://www.linkedin.com/in/johnhaltmaier/ |
Overview
Hybridge Capital Management (HCM) has acquired the Sandcastle North Oceanfront Resort in Myrtle Beach, SC off-market – seeking $30 million equity (at initial basis) to fund renovations and rebrand as an IHG VOCO – “The Shelby”.
Oceanfront property in thriving hospitality market – attracts 19 million visitors a year due to stunning beaches, warm climate and wide range of activities and entertainment options
Excellent value-add in an OZ with total expected project cost of $54 million – $223,000/key compared with the sales of two nearby unrenovated Hilton properties at $243,000/key (estimated renovated basis of $400,000/key)
Executed franchise agreement with IHG (which is providing $4.1 million of ”key money”) – VOCO is IHG’s fastest growing brand, with 55 hotels in 25 countries, such as Australia, Singapore, the UK and the UAE
Sponsor and co-investors have invested $11 million of equity to acquire the property and are willing to de-lever, depending on investor preferences on check size
Opportunity
The Sandcastle has been a popular destination since the 1980s due to its beautiful water views, proximity to the beach, and access to many tourist attractions, such as the Myrtle Beach boardwalk, the Sky Ferris wheel, the public fishing Pier 14, amusement parks, water parks, and over 90 championship golf courses
Previous owner was an independent operator who built the 101-room main hotel in 1984 and added two more buildings of 70 rooms each in the mid-1990s
Due primarily to the challenges across the hospitality industry from the COVID pandemic and the need for significant upgrades and updates to maintain market appeal, the owner decided to sell the property
Branded hotels in the area, such as Marriott and Hilton, have outperformed the independents hotels in terms of occupancy and revenue per key – adding the VOCO brand may help to significantly improve the Sandcastle’s performance
Renovation/Rebranding Strategy
Hybridge plans to shut down the property in the fall of 2024 and conduct a comprehensive six-month renovation – upgrading guestrooms, lobby, amenities, infrastructure and dining facilities
Plan to sign franchise agreement with IHG to relaunch the Sandcastle as a VOCO resort, IHG’s newest and fastest growing brand
IHG is expected to provide $4.1 million cash “Key Money” as an incentive, which will be used toward the renovation of the property
Partnering with Springboard Hospitality, a highly innovative hotel manager that has specialized for 30+ years in transforming dated hotels to be more appealing and profitable – currently manages 46 hotels across 13 states
Springboard has already begun to upgrade staffing, technology, performance measures monitoring, accounting/financial management and reporting to help improve the guest experience and increase financial performance and efficiency
Management
Max Mellman, Managing Partner, Hybridge Capital
- Over 12 years industry experience and wealth of industry knowledge, having grown up in a commercial real estate family. Proven track record of identifying and executing profitable real estate investments
- Prior to founding HCM, also founded Max Benjamin Partners, Inc., a boutique real estate investment bank focused on debt and equity placement in commercial real estate projects across the nation, which has consistently delivered strong returns to investors while maintaining a steadfast commitment to ethical and socially responsible investing
Sean Williams, Chief Development Officer, Springboard Hospitality
- Oversees new business development and investing for Springboard Hospitality and affiliates
- Professional and academic career in hospitality, investment management, investment banking, and real estate private equity spans three decades across three continents
- At GreenOak, led the negotiation, structuring, acquisition and asset management for over $750 million in hotels based in the United States, including the Thompson Miami Beach, the Hotel Figueroa in Los Angeles, and the award-winning Surfjack Hotel in Hawaii
Jacob Hallum, Associate, Hybridge Capital
- Jacob is an associate at HCM, where he is responsible for sourcing, underwriting, and managing acquisition and development opportunities
- Jacob is also a leader on the asset management team where is responsible for the performance of a variety of product types including our multifamily, office, and hospitality assets
- Jacob is a graduate of University of Southern California, where he earned his Master of Business Administration (MBA) and Master of Real Estate Development (MRED) degrees
Ben Rafter, President and CEO, Springboard Hospitality
- Leads growth, strategy and hotel revenue generation for Springboard Hospitality. Previously, president and CEO of Aqua Hospitality and president of Aston Hotels & Resorts, the largest hotel operator in the Waikiki market
- Grew Aqua Hospitality fivefold in less than four years, from a small Waikiki operator to the only hotel company on all six Hawaii tourism islands, and also completed more than 20 renovations ground-up developments
Specific Risks
- The hotel industry is highly competitive within and among resort areas with a large, diverse range of industry participants, many of which have more financial capacity than the company
- Within Myrtle Beach, other non-flagged properties may step up local competition also by renovating, upgrading and rebranding
- The renovation may take longer and cost more than expected
- The Myrtle Beach resorts are adjacent to low-income areas with high crime rates, which may deter vacations and corporate gatherings
- The hospitality industry can be volatile and subject to downturns with weaker economic conditions and lower levels of consumer confidence
- Private securities are speculative, illiquid, and carry a high degree of risk – including the loss of the entire investment