This Extended Stay Hotels Offering Is Targeting a 20.6% IRR

EquityMultiple has an active listing for Extended Stay Hotels for the acquisition of a 165-key extended stay hotel portfolio in Georgia. The two extended stay hotels are located in the cities of Columbus and Macon and the offering has a target internal rate of return (IRR) of 20.6%. Is this realistic? Let’s dig deeper.

Offering Snapshot:

Property Type: Hotels
Investment Type: Equity
Target Hold Period: 36 months
Minimum Investment: $15,000
Target Closing: Mid February
Projected Returns:

IRR: 20.6%
Equity Multiple: 1.7x 
Net Average Cash-on-Cash: 9.6%

Hypothetical Return on $100,000 investment:

Year 0: ($100,000)
Year 1: $7,018
Year 2: $10,310
Year 3: $149,761 (anticipated exit)

The Extended Stay Hotels Portfolio

The Extended Stay Hotels portfolio contains two properties, one located at 1721 Rollins Way, Columbus, GA 31904 (Columbus Hotel), and the other at 3980 Riverside Drive, Macon, GA 31210 (Macon Hotel). The portfolio will be purchased for $11.1 million, or approximately $67,000 per key, representing a 13% discount to recent comparable transactions and a 39% discount to replacement cost of $110,000 per key, according to the Investor Packet. The total project capitalization is $12.8 million, or roughly $78,000 per key.

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Columbus Hotel

The Columbus Hotel is a 92-key extended stay hotel that will be acquired for $6.2 million, or about $68,000 per key. The hotel has a trailing-12-month occupancy rate of 77.4% at an average daily rate (ADR) of $59.10 per night, which equates to a revenue per available room (RevPAR) of $45.74 per night, according to the STR Report in the Investor Packet.

Columbus is the 2nd largest city in the state of Georgia with a population of 202,000, and the larger Columbus-Auburn-Opelika, GA-AL Statistical Area (MSA) has a population of about 324,000. The MSA…