ACQUISITION & MANAGEMENT
TOWN PLACE SUITES
Texas | Alabama
A brief description of the location of each Town Place Suites
Houston NW
Situated in the Willowbrook submarket on the northwest side of the Houston MSA, Town Place Suites Houston NW enjoys a prime location. The hotel is conveniently located across the street from Hewlett- Packard campuses, attracting corporate demand from major companies like Baker Hughes and Haliburton. Group and leisure demand are driven by nearby attractions including Lone Star College- University Park, Vintage Park Shopping Village, Willowbrook Mall, and Brook Hollow. Visitors can also explore leisurely attractions such as Trader's Village, Old Towne Spring, Mountasia, and Splashtown Waterpark.
College Station
Town Place Suites College Station is located in the "Hospitality Corridor" of College Station, Texas. This vibrant city is home to Texas A&M University, a renowned Land, Sea, and Space-Grant institution. The university benefits from ongoing projects funded by prestigious agencies like NASA, the National Institutes of Health, the National Science Foundation, and the Office of Naval Research. With over 51,000 students and a sprawling campus spanning 5,200 acres, including the George H.W. Bush Presidential Library, College Station offers a thriving academic and research environment.
Austin
Town Place Suites Austin is centrally located in the Golden Triangle, Austin's premier retail area. The hotel is surrounded by prominent shopping destinations such as The Arboretum, Gateway Shopping Center, and The Domain, collectively offering approximately 2 million square feet of retail, office, and residential space. The northwest Austin/Round Rock area is known for its major IBM presence and is home to the world headquarters of Dell, employing around 16,000 people. Guests can enjoy the convenience of staying near these thriving business hubs and explore the vibrant atmosphere of Austin.
Houston Clear Lake
Nestled on the southeast side of the Houston MSA, Town Place Suites Houston Clear Lake is ideally situated near Galveston Bay. The area is renowned for being home to the Lyndon B. Johnson Space Center, the National Aeronautics and Space Administration's (NASA) center for human spaceflight training, research, and flight control. Clear Lake is also home to the Clear Lake Regional Medical Center, adding to the demand for accommodation in this area. Visitors can explore the wonders of space and enjoy the natural beauty of the bay while staying at this convenient location.
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Extended-stay Marriott branded
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Four-property hotel portfolio
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571 keys
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Texas and Alabama
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Built between 1999 and 2001
INVESTMENT SUMMARY AND CHALLENGES
Urbana believed the attractiveness of the investment opportunity was predicated upon several factors -
Improving Lodging Fundamentals - Urbana saw the timing of its purchase as occurring as the industry was coming out of its economic trough, and with its skill and leadership, Urbana believed performance could be brought back to pre-Great Recession highs. To this end, according to PKF Hospitality Research released in August 2011, the US lodging demand had fallen further than the economy during the Recession, but the industry had indeed turned the corner, and for 2012 PKF was predicting RevPAR would grow 6.2%, driven primarily by an increase in ADR of 5.1%.
Motivated Seller - Although Urbana’s initial offer was rejected, the winning bidder could not perform and interested parties were encouraged to resubmit. Urbana viewed this as an opportunity to aggressively pursue the entire portfolio due in part to the inability of the prior purchaser to perform along with its compelling institutional sponsorship that it believed would be well received by the seller.
Cost Savings - At the time of purchase, Marriott International had managed the properties. Urbana viewed this as an opportunity to reduce certain costs it viewed as unnecessary such as its cluster reservation systems, its revenue management oversight, as well as an opportunity to implement wage benefits to an industry standard.
Portfolio Basis – Notwithstanding the aforementioned attributes, Urbana viewed this as a very attractive opportunity from a pure “price-per-pound” perspective on its own given its all-in basis of $62,700 per key, which was far below estimated replacement costs of +$100,000 per key.
ACTION PLAN
In order to procure new 20-year franchise licenses from Marriott International, the acquisition of the TownePlace Suites portfolio was accompanied with a change of ownership property improvement plan (“PIP”) consisting primarily of the construction of new breakfast areas and adjoining kitchens, business center lobby expansions, as well as kitchen and bath countertops, flooring and new appliances in the guestrooms. The total cost of the PIP was nearly $3.4 million, or $6,000 per key.
OUTCOME
Capitalizing on the opportunities available and a successful execution of the PIP can be seen in the change of top line performance metrics as ADO, ADR and RevPAR increased from 63.8%, $82.14 and $52.41 at the time of acquisition to 68.4%, $96.94 and $66.29 at the time of sale, a 27% increase in room revenue. Operational improvements were as successful as the net operating income margin increased from 26.6% to nearly 29%.
PERFORMANCE METRICS
Instead of selling the entire portfolio as a collective unit (as was acquired), Urbana made the decision to sell each property individually over the course of four years. First sold was the property in Clearlake, TX in 2014, for $4,350,000. Next were the properties in Austin and College Station, sold together for $20,250,000 in March 2016. Following those came the Houston property, which sold for $7,000,000 in May 2017. Lastly, the Birmingham, AL property was sold in July 2018 for $5,950,000 and resulting in aggregate sales proceeds of $37,550,000, or $65,800 per key. These sales combined with robust interim cash flow that returned +80% of equity in 7 years resulted in a portfolio Internal Rate of Return and Capital Return Multiple of 16% and 1.67x, respectively, to total equity.