Syndicated Hotel Deal

[Tom Lacey]

Hello everyone,

I recently finished the 60 hours of coursework for my PA real estate license. The broker that I will be "hanging my license" with is pulling together a 40 room Syndicated hotel deal just outside of Pittsburgh. The hotel will be built by Cobblestone Inn and Suites as a turnkey operation. This includes the operation of the hotel after it is complete. On the conservative side (48% occupancy), the year 1 COC return is estimated to be 14%, moderate occupancy (55%) the COC return is 19% and the optimistic occupancy of 62% will yield a 24.6% return. If we can get any of these returns, I will be in a better position than my current traditional IRA is earning (7% average return over the last 5 years). So the math makes sense in my mind. The investment would be $50,000 for a 3.125% ownership in the hotel. The long term plan will be to sell the hotel 3-5 years after completion, once occupancy is consistent.

This hotel is being strategically located 15 minutes away from the recently announced Shell "Cracker Plant" and we anticipate to close on the deal by the end of August 2016 to begin the construction process.

Has anyone had experience with a syndicated hotel deal in the past?  Any pitfalls for me to look out for?