Frequently Asked Questions

Frequently asked questions about the adaptive reuse or hotel conversion investment industry.

What kind of returns does a hotel conversion give you?

Hotel conversions typically are not worth the investment unless they yield a 2x to 3x equity multiple. Historically, hotel conversions hover around 18% IRR all the way up to 40% plus IRR.

In easier terms, if you invested $100,000, you can expect to receive $200,000 to $300,000 back within 12 to 60 months, depending on the complexity of the project.

How do you know if the hotel or motel is actually a deal or opportunity?

We scrutinize many deals that come across our desk and 99% of them are not deals. We are looking for the following in a motel or hotel conversion candidate:

-1M population size and metro area minimum

-$80,000 minimum household income average

-Within five square miles of a hospital, university, Costco, Sam's Club, malls, and/or the freeway

-The building needs to be easily manipulated to become a desirable multifamily apartment community

-The municipality needs to be historically easy to work with

-Other hotel conversion assets or adaptive reuse projects need to have a presence in the area prior to ours, showing us that we are not the first to attempt an adaptive reuse project

-Average multifamily asset in the area needs to have a similar square footage to the end product of our potential conversion (this can be pretty difficult, but we also research the demographic of individuals who typically reside in studio apartments and make a decision based on the economics involved)

-Minimum unit or room count, 100 units (We have looked at projects smaller than 100 units, and some of them can be quite profitable, so it just really depends)

-Building age 1980 or newer (this is also something that is debatable, and every deal has its own DNA, so we would need to review it)

-We run the numbers on a pro forma or we use a calculator we have built ourselves to identify the risk profile and the upside to hit our goal metrics, which must be the following:

-18% IRR or more.

-1.5x plus equity multiple

-36 to 60 month acquisition, renovation, stabilization, and exit timeframe

-10% minimum cash-on-cash return per annum

How do you secure financing for these difficult adaptive reuse projects?

It takes specific and experienced lenders and private capital for these unique adaptive reuse opportunities. Because there are very few institutions and banks who will fund a hotel acquisition and asset class repositioning to apartment multifamily, it allows us an opportunity to source and close on projects that most cannot.

Most of these projects are financed with private equity, seller financing cooperation, and bridge lending, which converts to permanent financing after 12-24 months of interest-only payments. This mixed capital stack allows us to safely and securely protect investor capital, preserve bank relationships, and create the largest margin of success.

What does Andrew do during the time of construction?

If Andrew LeBaron is involved as a general partner, he will coordinate with his investor relations team and be present in investment committee meetings. He will also work particularly close with vetted adaptive reuse experienced commercial contractors, as that is his experience. He works with his finance and analysis team to create reports for his investors, answer investor questions, and he makes himself available when needed.

How often are investors paid dividend checks?

Every deal has its own DNA, so it depends on the renovation timeline and the stabilization period.

Investors can expect returns in as little as six months or as long as 36 months, depending on the size and complexity of the opportunity.

Does Andrew and his team raise capital the right way?

Yes, Andrew has successfully raised capital leveraging the SEC's Regulation D-506C fund terms and conditions with a private placement memorandum (PPM) outlining all of the terms of the security investors purchase.

Although it is worth noting that there are other special purpose vehicles or ways to acquire assets and invest directly with Andrew that do not require a proper fund to be erected.

How many deals has Andrew done?

Andrew has carried out four projects, but has a history of over 150 acquisitions in residential single family and small multifamily assets across two different states, Arizona and Texas.

He has also advised on over 30 hotel conversions across the United States with other operators and has helped hotel and motel owners make the best decisions and assisted with operations in their adaptive reuse projects.