All Forum Posts by: Jimmy Klein

Too bad its restricted only for MOB, I could have offered for you for a hotel we would develop. Granted it is much farther down from where we would like to develop. 

So you have hospitality investors looking to build in the Nashville area?

I own hotels and my partners know many people in Nashville that own hotels. If you are trying to secure land, hotel investors will look at many items such as visibility, average daily road traffic, performance of existing hotels in the submarket. 

Are you going to be partnering with them on hotel developments?

If so, be careful Nashville is ranking with New York in terms of new hotel supply.

If your reaching out to residential homeowners, then be sure you can get zoned for a hotel in that area.

Developing a hotel isn't easy. I'd say its the hardest asset to build and maintain because there are many moving pieces.

@Jonathan Orr I wouldn't necessarily say nobody lets them go. I know tons of build and sell developers in the hotel space. They build and run for three years and sell. In fact, when a PIP comes up, many hotel owners often sell rather than renovate.

@Shital Thakkar There is no simple number because all markets are different. Here is my experience from both acquiring and developing hotels. Many years ago it was more feasible to build as construction costs were low. You could build a hotel for $75k a key and it would be worth a $100k a key stablized. Now that has changed completely and it may make sense to buy rather than build in certain markets. However, one thing is for certain, hotel valuations are hefty right now regardless if you buy or build, and there is a ton of new supply coming. 

MF is probably more scalable as you have much less involvement and operations are smaller. You dont need housekeepers or a 24/7 front desk staff, just a leasing agent and good maintenance staff. 

As someone that owns hotels, I am not sure what these people are talking about. Yes there are two valuation metrics, GRM (GROSS REVENUE MULTIPLIER) and cap rate. Cap rate is mainly used in large urban markets and meant for REITs. GRM is meant for normal investors such as ourselves. You can't just say 2.5-3x is what you pay. It all depends on location, age, property type(exterior/interior), capex, etc.

Not sure what you mean by people cringe. I know many professionals in commercial real estate and it seems MF is the golden child of all the asset classes. I am invested in retail and hotels as well. Regarding hotels, these are not even remotely passive investments, but in return you get a significantly higher yield. For retail, its higher risk, but if a tenant vacants, you might have some down time filling it up.

With MF, if a tenant vacants, there is a pretty good chance of filling it up quicker depending on the market. So I disagree about people cringing. Contrary to what others believe, MF is actually pretty passive compared to the other asset types as long as you have a decent manager or management company in place with a good maintenance staff.

@Kent Raburn

Shoot me an email. We only do hotels. 

Well we have a management company and own hotels. I would honestly stay away from Europe and luxury hotels given this whole Brexit situation. Also when you focus on ultra luxury, there are problems with these properties as your margins get cut a bit.

@Account Closed

Congrats on finding an investor that is willing to help you with this structure. We do hotels and my partner has had a tough time with this as some just need to have a 15% equity contribution. For example, the returns for hotels are almost like 20%+ annually, but some investors are just not willing to even accept a 10% equity contribution as enough. So my partner has been searching still for investors that allow for a 10% equity contribution or less since he has to guaranty the loans and needs to show liquidity. So its actually pretty good that you achieved this. 

First of all, basic math, 10% of $10M isn't $100K, its $1 million. Your question answers itself, you have an investor that wants to fund you, but you need 10%, which you don't have to begin with...