What do you think of Buffalo NY?

Question

I am a newbie here and not quite sure which sub-forum my question should belong to... I am currently presented this opportunity of investing in a hotel (more specifically Adam's Mark) in Buffalo NY. The deal is to own a unit there and participate in a profit sharing program. The new owner of the hotel is a Canadian developer hence this investment is eligible to Canadians (which I am). What do you guys/gals think of hospitality industry in Buffalo? Any insight/opinion is appreciated! Thanks a million.

Rachel

Rachel Fang · Answer

@Andrew C. sorry for the late reply - hadn't been on biggerpocket lately.

I don't think this type of investment is common, at least it was my first time learning about it. I believe this is a "creative" way for the developer to fund his project. So an individual investor would invest and own a hotel room (different prices for different types, minimum 100k CAD) and your amount of investment translates into shares. It is a profit sharing model. So there is no ongoing expenses to pay per se, as the profit is calculated after all expenses (like building maintenance and renovation, marketing, staff, etc) are being deducted from all revenue (hotel rooms revenue, restaurants, events, parking, etc).

This particular hotel is in downtown buffalo but kinda rundown and very mis-managed so it is advertised to have great potential. The projected ROI is somewhere around 15~20%.

The investors that participate this program would own a deeded property. We were initially interested but realized there might be more tax complications across border so we have passed the opportunity.

I hope I explained well. Let me know if you have any more questions.

Andrew Carducci · Answer

Hi Rachel,

You should check out this article, there has been a lot of activity in the hotel industry in Buffalo in the past few years http://buffalonews.com/2017/02/16/hotels-prospectu... downtown is still over the national occupancy rate despite all the new rooms that have come online

Andrew C. · Answer

@Rachel Fang Sorry for my ignorance, but how does an investment in a hotel unit work?  Do you have any ongoing expenses after the investment.  How do investors share in revenue?  And I'm curious to know what the developer projected as the ROI for investors.  I ask because for that amount of investment, perhaps it might be better to buy an investment property instead.  Of course, that might be more work and possibly riskier.

Jamie Schrier · Answer

I work near the Adam's Mark and walk past it twice a day (weekdays). The hotel is dated and could definitely use some TLC. With that said, my understanding is that there are a couple of business's that lease some of the space and it appears that they do quite well in booking bus tours and professional conferences based on the traffic I see. I've also seen quite a few youth hockey teams staying there for tournaments held the Harbor Center. The hotel houses a restaurant and has it's own parking lot and ramp, which is always a revenue generator. It's located within walking distance of some of the local high traffic areas; Harbor Center, Key Bank Center, the Buffalo Marina, Canalside, and is right near the federal, county, city and family courthouses. It is also relatively close to the convention center, the outer harbor, the Amtrak station, the bus station and an easy drive (20-25 mins) to the airport and just across the bridge to Ft. Erie Canada.

The biggest asset in my opinion is it's location and it's potential, it couldn't be any better for this area. Located right on an interstate north south extension.

The biggest liability is the current condition. It's well used and it shows. With that said it may be mainly cosmetic? I don't know. Maybe the mechanicals are in great shape? I don't know. I do believe that the hotel is positioned for success and if the numbers make sense in the renovations and a detail oriented marketing plan and some strategic partnerships could be achieved then I think the sky is the limit. The truth is in the details of the inspections and the numbers. I'm relatively certain, just by observation of traffic alone, the hotel has a great deal of underutilized capacity. There are newer, better kept hotels nearby so there is clearly traffic lost to hotels with a better appearance.

Just my observations and a humble opinion... Hope the info helps in some way. Best of Luck with your decision!

Jamie

Rachel Fang · Answer

@Matthew Irish-Jones @David Niles thank you both.

Yea, it is a massive hotel. The developer's plan is to do a major makeover after closing. 99,900 CAD (equivalent to 70,000~75,000 USD) for retail investors to purchase a unit. Just wondering if there would be enough demand of hotel rooms/event space in Buffalo tho - I know sports is big in the city, besides that, anything else?

David Niles · Answer

I would be interested in hearing his plans.  While the Adams Mark is in a great location, I dont recall the last major overhaul its had.  I havent been in there in quite awhile but it was getting pretty worn and dated.

Matthew Irish-Jones · Answer

@Rachel Fang Adam's mark is located right in the heart of the city so it is a great location.  They have had a good reputation for a long time.  As for the city in General we are seeing a lot of investments come in from out of state and out of country.

There has also been a lot of economic growth that is leading a lot of people to believe that there is some long term staying power to this trend.  We have done really well investing in Buffalo over the last 10 years.

With all that being said... I would still want to see the numbers before I made a decision if I were you.

Thanks

What do you think of Buffalo NY?

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