Marriott and Hilton Premium Select-Service Hotels
Acquisition Program – 2024
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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
Pharos, a Marriott and Hilton-approved owner and operator of several select-service hotel brands, is seeking $45 million (alongside $5 million of sponsor capital) to acquire 5-7 carefully selected hotel properties using 50% leverage for $100 million of total purchasing power.
Sponsor believes conditions are ripe to acquire this hotel portfolio in select markets at favorable pricing due to several factors, including maturing loans in a high-interest rate environment
Extensive expertise and track record acquiring and managing premium brand select service hotels
The hotels will be owned and operated using a streamlined owner-operator business model
Pharos has a clean and fully operational hotel management and investment platform
Opportunity
The premium branded select-service hotel market has several potential pressure points for hotel owners that could create immediate buying opportunities.
Maturing loans made during the pre-COVID-19 low-interest rate environment (typically 5-years for hotels) may force owners to make difficult decisions on whether to refinance at much higher rates or sell
The end of fund life for many private equity firms will require them to sell to close the fund, which will provide a more motivated selling market
Major brand-required renovations are due for many hotels, forcing owners to decide whether to spend more capital on the hotel or sell the hotel
Higher interest rates may eliminate many high-leverage buyers, creating better investing opportunities for lower-leverage or all-cash buyers
Property deferred maintenance, often delayed due to COVID-19, puts additional pressure on owners to invest more capital into their properties
Solution/Strategy
Marriott and Hilton select service hotels are mature and reliable brands in one of the best performing real estate asset classes
- Marriott – Courtyard, Residence Inn, Springhill Suites, Aloft
- Hilton – Homewood Suite, Hampton, Hilton Garden Inn
Marriott (170 million members) and Hilton (180 million members) have the two of the best brand-loyalty programs in the industry, which creates occupancy predictability
Millions of dollars are spent annually by Marriott and Hilton on individual brand national awareness
Management
Edward (Buddy) Watson, III | Chief Executive Officer
- Over 40 years of experience within the hotel and travel industry, including extensive direct managing director experience in hotel ownership, development, operations, and financial experience
- Has been directly involved in all aspects of the hotel industry as the managing partner of numerous single-asset hotel entities totaling $300 million
- Has been a franchisee and operator with Marriott and Hilton and has completed 22 transactions
- Has had public companies, family offices, private equity firms, municipalities, institutional investors, and public bondholders as investors
- Attended Woodberry Forest School and the University of Miami
Ros Mallory | Chief Investment Officer
- Over 25 years of experience in the hospitality industry, including 15 years with JLL Hotels and Hospitality Group helping lead the East Coast investment sales team
- Successfully completed over 250 select-service investment sales transactions valued at over $1.5 billion, including single asset, portfolio, and hotel note sales
- Extensive experience working with institutional owners including PE firms, public REITs, and CMBS special servicers and many close relationships with hotel owners/operators. BA, Wake Forest University
- Licensed real estate broker in North Carolina and South Carolina
Stephanie Campbell, CPA | Chief Accounting Officer
- CPA with over 20 years of experience as an accountant, including over 10 years with Pharos
- Served as an auditor, trusted business advisor and chief financial officer at several leading financial service firms. Worked for Ernst & Young, KPMG and Green Walker. Secretary and Treasurer of Pharos Hospitality, LLC
- Graduate of the University of South Carolina
Specific Risks
- Sponsor may overpay for properties, lowering returns or possibly resulting in losses
- Hotels may not be managed properly and fail to meet franchise requirements, which may result in losing the franchise or having to sell at unfavorable rates
- Hotel rates and occupancy may be adversely affected by weak macro-economic conditions
- Hotel prices and profitability are in part affected by interest rates, which may remain high or possibly rise
- Hotel operating and construction costs may be higher than expected
- Potential staffing shortages could adversely affect property operating performance as well as potential sale prices
- Hotel property prices may be unfavorable at the end of the intended investment hold period
- Private securities are speculative, illiquid, and carry a high degree of risk – including the loss of the entire investment.