We are a IRR focused firm and we have a large hotel portfolio with debt on it. Right now the cash flow at the property is negative. Does it make sense to pay off the debt to juice return and re lever it when cash flow is positive?
No, the cost of capital of equity > cost of capital of debt, assuming you can deploy and get that equity invested in other deals.
Say your IRR for your other deals on your equity is 15%, your cost of debt is most likely way lower then 15%. So your firm should invest the equity in other deals to get 15% return, and continue paying the hotel debt as is.
If your firm has a bunch of equity lying around not being invested and not making any money, sure pay off that debt.
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No, the cost of capital of equity > cost of capital of debt, assuming you can deploy and get that equity invested in other deals.
Say your IRR for your other deals on your equity is 15%, your cost of debt is most likely way lower then 15%. So your firm should invest the equity in other deals to get 15% return, and continue paying the hotel debt as is.
If your firm has a bunch of equity lying around not being invested and not making any money, sure pay off that debt.
Tenetur eos qui sed sit numquam laudantium. Veniam cumque officia adipisci aut recusandae ex aut quis. Laboriosam porro culpa numquam modi.
Non reiciendis quos veritatis minus qui quo atque. Ab voluptate totam aspernatur. Fugit perspiciatis blanditiis voluptas et pariatur aperiam qui. Itaque tempore consequuntur ut consequatur modi repellendus est.
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