All Forum Posts by: Jimmy Klein

We have hotels where we had excess frontage land that we leased out. Difference was that the buildings were developed by us. I looked at the location. A ground lease is possible by a potential retail tenant depending on how other competitors are faring in sales per sqft. How much is the hotel making currently

Hotels typically have higher cap rates. Sometimes cap rates are lower because of poor management. While cap rate based on existing T12 may only be 7%, it is likely a hotel could achieve 10%+. Example, we bought a hotel that had a cap rate of 4% based on their financials . We ignored this because we knew at the current revenue we could do better. On our first year we did the equivalent of a 12% cap rate on the price we paid. Sometimes hotels are sold due to poor management. This business is not for everyone.

So you don't have money for down payment or even earnest money. How much money do you have to invest?

Not sure if it's a troll post, but I'll bite. We own hotels and no way a bank will finance you 75% based on just that income. You might be able to purchase a roadside motel but no way would you get financing for development of a new hotel.

On another note we can sell you a hotel and will even seller finance 25% of it. We will need full and complete personal guarantees and a complete title tied to the property. Annual interest will be 18%. If you miss a single payment we will file for foreclosure. Also the selling price is 75% higher than normal as we are seller financing. Doubtful if it will appraise, but if your interested let me know. :)

The above is an example of a situation where someone would finance 25%. Also my offer is serious if you want it. :)

Your best bet is to sell the place then. I am assuming it's a cash business. Employees will steal. It's a risk especially if the owners are working elsewhere and not keeping an eye on the business. Trust me a small property like this won't attract any joint venture partners. Even if you get interest, the terms would be terrible. 

I would suggest getting financials and sending me the information. Or at least give us an idea of occupancy. There has to be some papers. I am willing to help but need some info to work with so I can give you proper advice. 

How is the comp set doing? Can you pull a STAR Report? If the comp set is doing equally poorly then there is not much you can do to improve it. If you are under performing than this means there is room for improvement.

Private equity firms rarely touch hotels under the $10 million range. So it's no use to you.

Where in Kansas is it? How much revenue is it doing and ultimately how much are you looking to sell for? How many rooms are there? Sometimes you can find a buyer but you may need to take a haircut on price.

Give me the numbers. I am assuming since you said small motel it's not a franchise. We only do hotel deals but we specialize in larger franchise properties. 

We pretty much exclusively purchase franchised hotels. That part of Florida is a very expensive market and the hotels that exist there can really only be acquired by large institutions. There are some smaller properties but owners still ask a heavy price for them.

Working with equity brokers can be a pain sometimes. They promise you the world and yes typically they take around 3%. The issue comes with the terms. Anyone can get equity if the terms are too good for any investors. The first time we reached out to these brokers was when we exceeded our funding limit and were doing projects where our regular investors couldn't really help close the capital stack. We got three term sheets back and all them asking for an arm and a leg.

Keep in mind, any investor these brokers bring it pretty much have an agreement in place that if you use them again they get another 3% or whatever was initially decided. The relationships with your regular investors are everything. They are the ones that can fund you quickly. Whereas the brokers go through pages of due diligence and then give you an answer that you may not always like even if it is a yes.

@Joel Owens

What are you seeing for yield on construction cost for STNL? I am curious how much profit exists for the developers. For example, a NNN Starbucks I have seen usually go for around a 4.5-5.5% cap. Mcdonalds are usually much lower around 3%-4%. Are there good margins for the developers?