So the general giste is you have boutique all-suite hotels from a first-time hotel operator and investor (used to invest in apartments and airbnb/str single and some multi-family). In growing markets like Portland, Austin, Nashville, Asheville etc.
The promote structure is 9% pref 80/20 to 13% 70/30 to 18% 65/35 therafter
1% asset management fee, 3% development fee, .5% asset disposition and acqusition fees.
Of course the asset management fee, acquisition and disposition fees would have a relatively normal discount rate.
But what would you discount the promote at. I was thinking probably somewhere in the high teens, maybe 20%. But that's just based off of feel. Anyone have any good dcf models from actual deals for new build/relatively high risk projects?
P.S. this is all for purpose of modeling a GP DCF to get a sense of it's inherent value, so the GP can maybe sell a piece of their end.
I think high teens is a good starting point -- especially with the way you described the deal and the inherent risk attached to it. I wouldn't necessarily think of the DCR as a set number, but moreso as a spread to say the DCR you are using for other parts of the deal. Shops with steady income and cash flow streams typically use 8-10% DCR...I'd typically adjust from there. But also keep in mind what the end-game is. If it is for a model to be shared to strike a deal, just know whatever you input, the other party is likely going to claim "multiples and discount rates for development are just too risky" and inflate accordingly.
Et omnis perferendis et tenetur aut. Velit asperiores recusandae neque ad error harum. Voluptate aliquid cupiditate pariatur et sint qui id.
Fugit occaecati in accusamus enim quo mollitia. Dolor architecto error placeat beatae sed.
Ea id fuga vel qui enim et cupiditate quos. Illo illum ea quis sed dolor aut suscipit rerum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...