NOT OPEN TO GENERAL SOLICITATION
Sage Equity Partners (”Sage”) is excited to invest alongside Crescent Real Estate LLC (“Crescent”) again, who has purchased two Select Service hotels (the “Portfolio”) in fast growing cities. The assets in the Portfolio are situated in well-amenitized, urban infill environments with immediate proximity to resilient demand drivers – major universities and medical centers.
Demand for these types of portfolios is on the rise due to higher margins, strong stability through business cycles and profitability during the pandemic. Additionally, these types of hotel’s profitability has exceeded inflation given adjustable nightly rates and fixed-cost leverage. Crescent’s plan is to acquire these Premium Select Service hotels, improve management and operational efficiencies, aggregate into a portfolio of assets, and sell to an institutional buyer. Crescent has proven success with optimizing operations to improve margins and generate additional NOI. Together with HEI, Crescent has historically realized 94% -106% of underwritten cost savings for their Hotel assets.
Irreplaceable Real Estate: Each of the assets in the Portfolio are located on great real estate with high barriers to entry. These assets are in secondary and ancillary high-growth markets, in well-amenitized, urban infill locations, directly in front of the path of growth. Each asset is located near multiple resilient demand drivers, such as universities and medical centers, has been around since 2000+ and performed well through several downturns, including at the height of the pandemic.
Strong Cash Flow: Projected cash on cash is modeled at 11.1% five-year average cash on cash net to LPs. The assets in the Portfolio generated higher margins and achieved more stable profitability through Covid. Crescent’s contribution of 20% of the equity is indicative of their strong commitment to the Portfolio’s of the Hotel. Traditionally, hotel profitability has exceeded inflation given adjustable nightly rates and fixed-cost leverage.
Great Management Team: Crescent has immense experience with the Marriott, Hyatt and Hilton brands, of which all of the assets in the Portfolio are subsets. Crescent has proven success with optimizing operations to improve margins and generate additional NOI. Crescent and HEI have historically realized 94%-106% of under written cost savings for their Hotel assets.
Clear Exit Strategy: There is a readily available market in which these types of assets trade. The business plan is to continue aggregating PSS assets into a pool and sell the portfolio to an institutional buyer that will pay premium for the transaction. The cash-on-cash returns allow management to hold the assets until the right exit to generate the most benefit for our LPs.
Strong, Stable Demand: The Medical District delivers consistent, growing demand. The 8th largest hospital in the US, UAB is in the top 1% of NIH funding and boasts a premier transplant institute, cancer center, level 1 trauma center, and proton therapy center. The University of Alabama at Birmingham also saw an enrollment of 22,289 students in the fall of 2021.
Robust Historical Performance and Resilience: The Hotel averaged a 111% RevPAR index from 2018-19. During the pandemic-stricken TTM Sep- 2021 period, the Hotel recorded a RevPAR penetration of 122% and improved 2 ranks in its competitive set.
Superior Product: Built with concrete and steel construction in 2009, the Hotel is in excellent condition and 5 years newer than our competitive set’s baseline.
Post-Renovation Upside: We will conduct a $3.2M ($25k/key) guest-facing overhaul of the guest rooms, bathrooms and pool recreation area.
Year Built / Renovated: 2009 / 2017
LP Avg. 5-year Cash Yield: 11.1%
Acquisition Price: $24,750,000
LP Levered IRR: 15.8%
LP MOIC: 2.0x
Favorable Supply Changes: Following the conversions of the Residence Inn (Student Housing) and Courtyard (Non-Profit Family House facility), the closest Marriott flag is now 3 miles away.
Quality Product in Thriving Submarket: Walnut developed the Hotel in 2010 as an anchor within its $135M Bakery Square mixed-use development. Overall, the site contains 90k sf retail, 2k parking spaces and three Class A office buildings comprising 950k sf.
Strong Demand Generators: Bakery Square’s 3 office buildings boast notable credit tenants Google, Philips, Dept of VA, Carnegie Mellon, Compass, UPMC Enterprises and University of Pittsburgh, and connect to the Hotel via skybridge.
Year Built: 2010
LP Avg. 5-year Cash Yield: 11.0%
Acquisition Price: $24,850,000
LP Levered IRR: 14.8%
LP MOIC: 1.9x
Timing of Funds:
May 25th, 2022
Timing of Close:
July 1st, 2022
In 2016, John Goff combined the resources of Crescent Real Estate Holdings and Goff Capital Partners to establish and lead the capital campaigns for the GP Invitation Fund I, a private, invitation-only Fund that raised $200 million and allowed for more than $4 billion in investment capacity. The Fund, focused on properties in the U.S., partners with long-standing institutional relationships. The unique structure of the fund allows Crescent to be strategic in timing, property type, and the structure in which it invests. This flexibility has been critical to past success and is even more important given today’s market climate. Today, Crescent manages in excess of $5.3 billion in real estate assets and securities. The Fund will continue to purchase assets and pursue development opportunities in line with its strategy to increase the overall value of the portfolio.