Hilton Home2 Suites and Holiday Inn Express Hotel acquisition project in Pearland (Houston)
Q. Why are these hotels being sold?
These hotels are currently owned by a family that has a large number of gas stations, and these hotels do not fit in their portfolio, and hence do not receive an appropriate level of attention. There are also health related issues from ownership so it has become difficult to manage.
Q. What is the value-add in this project?
There is a lot of scope for management value-add by improving operations, guest service, better training of staff in both hotels. We have the change-of-ownership, brand mandated Property Improvement Plan (PIP) for the hotels. The Holiday Inn will go through a larger brand-required refresh/upgrade to bring it to current brand standards which will help in increasing occupancy, revenues, and thereby increasing property values for sale/exit.
Q. How do hotels compare to some other asset classes?
Unlike many other asset classes, Hotels are a prepaid business, hence we do not have to deal with delinquency, collections, evictions, and the client demographic is a lot more affluent.
The subject hotels cash flow better compared to many other asset classes including multi-family.
For hotels there is transparency of revenues as reported to various agencies. Rich data is available for comparison with competitors for continual adjustment of sales and pricing.
Q. Do you take retirement funds?
Yes, one can invest retirement funds from IRA or 401k by opening an SDIRA account with any IRS approved custodian of which there are many.
Q. How will sales and marketing be done?
Most of the sales and marketing is done by the large global franchisor brands which are the owners for Hilton Home2 Suites, and Holiday Inn Express in our case. These brands have large loyalty programs with about 195 million members for Hilton and 130 million members for IHG the owners of Holiday Inn Express. Central reservation systems brings in traffic via various sources.
There will also be a person on our team focused on local sales, reputation management, revenue management (dynamic pricing) to reach out to local businesses, group sales, and events.
The hotels benefit from year round demand drivers from many sources. Worlds largest medical center the TMC (Texas Medical Center), NRG Center – a busy complex of stadiums and event centers, are about a 15 minute drive from the hotels.
The hotels are next to an urban high traffic highway corner with high visibility in a primary market.
Q. How will the hotels be managed?
We are vertically integrated which means the hotels will be self-managed and not by a third party management company and this helps us in keeping costs low, maximize revenues and optimize operations. There will be a full time on-site General Manager which will be shared by both hotels and the sponsors will be actively involved in executing and monitoring our business plan.
Q. When were the hotels built?
The Hilton Home2 Suites was built in 2019, and the Holiday Inn Express was built in 2011 and renovated in the last few years.
Q. What kind of facilities are available?
Both hotels have meeting rooms, fitness center, guest laundry, wifi, patio, grill, swimming pools. The Hilton has a saltwater pool. The Holiday Inn has 86 rooms, and Hilton has 84 rooms.
Q. Have the hotels flooded?
The hotels have never flooded. There is a large stormwater retention pond on the back side. The hotels are not in the FEMA flood zone.
Q. How is the competition?
The industry standard STAR reports have been reviewed and there is scope to further increase occupancy, Average Daily Rate (ADR) and thereby Revenue Per Available Room (RevPAR).
It is difficult to increase the supply of hotel rooms in Pearland by building new hotels because of the lengthy permitting process and high replacement costs.
Q. How are the sponsors qualified?
Qualified sponsors with extensive experience in managing projects, strategizing, operations, construction, vendors, upgrades, revenue management, hospitality, finance.
The sponsors have been qualified by the franchisor brands and lenders.
We manage transparently with high standards of ethics & morals and if this aligns with you, then join with us. Please feel free to get hold of us.
Q. Can I visit the hotels?
Yes, you can. Please do not disturb employees though. After the close of the transaction, we can better facilitate hotel visits. If you are not nearby try a google drive by.
You can also see pictures at: Hilton & Holiday Inn Express
Q. When will the closing happen?
By January 2025 end.
Q. What about financial reports?
If you need historical financials, let us know. In future financial reports will be shared with partners monthly on a transparent basis.
Q. How will distributions be sent?
Distributions will be sent out once after each quarter by ACH.
Q. What are the tax advantages on this project?
Quarterly distributions are setup as a return of capital to minimize taxes.
We will do a cost-segregation study and all investors receive their pro-rata share of bonus depreciation which can be used to offset other income sources. Please consult your CPA. IRS allows rolling forward of depreciation to future years if it cannot be utilized in the first year.
When we exit and sell the hotels after the projected hold period of 5 years, the proceeds are distributed back to investors and those returns are generally taxed at a lower long-term capital gains rate which can be again offset if you obtain depreciation from another project at the time.
Q. What do I sign?
Investors have to sign and the sponsors countersign the combined PPM (Private Placement Memorandum) and Subscription agreement. These documents are prepared by SEC (Securities & Exchange Commission) attorneys as these investments are regulated by the SEC.
Q. How is the enthusiasm?
We are excited about this project and hope you partner with us on this journey.