I am not in real estate, so while I'm very comfortable with financial models there are a few items I could use some help on. I assume these are very simple for RE professionals, so I'd appreciate any help I can get.
Is there a source to determine avg expected cap rate on a hotel development? For this particular development it is in suburban chicago, off the expressway I think 100-150 beds.
When considering government incentives, what rate should these be discounted at to determine the NPV of incentives? I'm assuming at cost of capital, but I'm seeing it at another # which surprises me but may be typical of RE deals.
THanks,
-google the cbre cap rate survey. Should have cap rates for suburban limited service hotels in Chicago. -are these government incentives Ives guarantees or tied to the performance of the hotel? If the former, tie it to the 10 yr treasury (assuming the government entity providing the guaranty is AAA or better). If the latter, probably a pretty wide discount rate for suburban limited service hotels in chi. Maybe like 10%? I don't do hotel acquisitions so I'm not the right one to answer this.
I'd be cautious with chicago. A lot of rooms recently came online / are coming online in the city and a lot of softness in revpar over the next few yrs...
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