Residence Inn St. Louis Airport / Earth City Investment Opportunity
April 2016
Residence Inn St. Louis Airport / Earth City Legal Disclosures THIS PRESENTATION IS QUALIFIED IN ITS ENTIRETY AND WILL BE GOVERENED BY THE SUBSCRIPTION AGREEMENT, AS WELL AS THE OPERATING AGREEMENT AND THE SUBSCRIPTION MATERIALS RELATED THERETO, EACH OF WHICH MAY BE AMENDED AND/OR MODIFIED FROM TIME TO TIME PRIOR TO THE FINAL CLOSING OF THE INVESTMENT, AND EACH OF WHICH WILL BE MADE AVAILABLE UPON REQUEST. THIS PRESENTATION HAS BEEN PREPARED ON A CONFIDENTIAL BASIS SOLEY FOR YOUR BENEFIT AND ANY INFORMATION CONTAINED HEREIN IS NOT TO BE REPRODUCED OR REDISTRIBUTED. BY ACCEPTING AND VIEWING THIS PRESENTATION YOU AGREE TO KEEP ALL INFORMATION CONTAINED HEREIN STRICKLY CONFIDENTIAL AND NOT TO DISCLOSE THE SAME TO ANYONE OTHER THAN YOUR PROFESSIONAL ADVISORS ON A CONFIDENTIAL BASIS. YOU ALSO AGREE TO PROMPTLY RETURN THIS PRESENTATION AND/OR DESTROY ALL COPIES THEREOF UPON THE REQUEST OF DOMINION HOSPITALITY – EARTH CITY, LLC. THIS PRESENTATION IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, NOR SHALL ANY SECURITIES BE OFFERED OR SOLD TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER, SOLICITATION, PURCHASE OR SLAE WOULD BE UNLAWFUL. AN OFFER OF INTERESTS IN THE PROJECT SHALL BE MADE ONLY UPON THE DELIVERY OF THE CONFIDENTIAL SUBSCRIPTION AGREEMENT AND SHALL ONLY BE MADE TO ACCREDITED INVESTORS (AS DEFINED IN RULE 501 OF REGULATION D). THE INTERESTS IN THE INVESTMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933 OF THE UNITED STATES OF AMERICA, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATED OF AMERIAC ABSENT REGISTERATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION FROM SUCH ACT. THE INVESTMENT INTERESTS DESCRIBED IN THIS PRESENTATION WILL ALSO BE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE SET FORTH IN THE OPERATING AGREEMENT. EACH PROSPECTIVE INVESTOR SHOULD MAKE ITS OWN INVESTIGATION AND EVALUATION OF THE POTENTIAL INVESTMENT DESCRIBED HEREIN, INCLUDING THE MERITS AND RISKS THEREOF, AND SHOULD REVIEW THE “RISK FACTORS” SET FORTH IN THE SUBSCRIPTION AGREEMENT. PRIOR TO ANY INVESTMENT, EACH PROSPECTIVE INVESTOR WILL HAVE THE OPPORTINUTY TO ASK QUESTIONS OF AND RECEIVE ANSWERS AND ADDITIONAL INFORMATION FROM THE MANAGERS REGARDING THE TERMS AND CONDITIONS OF THE INVESTMENT AND OTHER RELEVANT MATTERS. EACH PROSPECTIVE INVESTOR SHOULD SEEK PROFESSIONAL ADVICE CONCERNING THE LEGAL AND TAX CONSEQUENCES OF SUCH INVESTMENT. PROSPECTIVE INVESTORS SHOULD HAVE THE FINANCIAL ABILITY AND WILLINGNESS TO ACCEPT THE HIGH RISK AND LACK OF LIQUIDITY INHERENT IN SUCH AN INVESTMENT. THE OWNER RESERVES THE RIGHT TO MODIFY ANY OF THE TERMS HEREIN. THE INFORMATION CONTAINED HEREIN HAS BEEN COMPILED AS OF APRIL 2016 (UNLESS OTHERWISE STATED HEREIN). NO OBLIGATION IS UNDERTAKEN TO UPDATE SUCH INFORMATION, WHETHER AS A RESULT OF NEW INFORMATION, FURTHER EVENTS OR OTHERWISE. CERTAIN INFORMATION IN THIS PRESENTATION CONTAINS, OR IS OTHERWISE DERIVED FROM, ESTIMATES THAT ARE BASED ON VARIOUS ASSUMPTIONS MADE BY THE OWNER. THE USE OF ASSUMPTIONS IS INHERENTLY INEXACT AND SUBJECT TO THE OCCURRENCE OF FURTHER EVENTS, MANY OF WHICH ARE UNFORSEEN OR HAVE OTHERWISE NOT BEEN TAKEN INTO ACCOUNT. PRIOR PERFORMANCE INFORMATION OF THE SUBJECT PROPERTY OR THE OVERALL REAL ESTATE MARKET IS CALCULATED BASED ON UNAUDITED FINANCIAL DATA. IN CONSIDERING THE PRIOR PERFORMANCE INFORMATION CONTAINED HEREIN, THE RECIPIENT SHOULD BEAR IN MIND THAT PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND THERE CAN BE NO ASSURANCE THAT THE INVESTMENT WILL ACHIEVE COMPARABLE RESULTS. PRELIMINARY FINANCIAL INFORMATION CONTAINED HEREIN IS BASED ON UNCERTAIN MARKET CONDITIONS AND UNDERTAIN FINANCING. THE ACTUAL FINANCIAL PERFORMANCE OF ANY INVESTMENT WILL DIFFER FROM THE PERFORMANCE SET FORTH IN THE PRELIMINARY FINANCIAL INFORMATION, AN INVESTOR’S RETURN ON ITS INVESTMENT MAY VARY SUBSTANTIALLY FROM THE RESULTS SET FORTH IN THE PRELIMINARY FINANCIAL INFORMATION AND THERE CAN BE NO ASSURANCE THAT SUCH A VARIANCE MAY RESULT IN ACTUAL INVESTMENT RETURNS SUBSTANTIALLY LESS THAN THE INVESTMENT RETURNS SET FORTH IN THE PRELIMINIARY FINANCIAL INFORMATION.
Residence Inn St. Louis Airport / Earth City Investment Opportunity
We are pleased to present this overview of a potential opportunity to invest in the Residence Inn by Marriott St. Louis Airport / Earth City property. This hotel was the first Residence Inn developed by the principals of EQUIS Hospitality Management. The core strength of EQUIS’ development, construction, project design, financing expertise, and hotel management were combined to develop the Residence Inn Earth City hotel. The Residence Inn brand is Marriott’s leading extended stay select service brand with over 700 hotels system wide achieving 79.5% system occupancy and a system average of $139.45 in average daily room rate. The strength of the Residence Inn Earth City is demonstrated by the March 2016 trailing twelve month performance statistics of 79.3% occupancy and $117.04 average daily rate. Even within the very strong performing Residence Inn brand the Earth City location is a standout facility yet still has plenty of room to continue growing. Started in 1971, the 1,175-acre Earth City Business Park is located in Northwest St. Louis County with frontage on I-70. The Park contains 12.3 million square feet of high quality office and industrial space in 168 buildings and is home to an estimated 300 businesses employing about 15,000 people. The hotel’s location in the northwest quadrant of St. Louis provides convenient access to the major employers such as Boeing, CCA Global, State Farm, Dent Wizard, FedEx, Sun Edison, US Bank, United HealthCare, AT&T, St. Louis Airport, and government related Department of Defense contractors. The Residence Inn Earth City is located on I-70 (a major arterial interstate providing access to the St. Louis Airport and metro area) and strategically located within the Earth City Business Park, 5 miles from the St. Louis International Airport, and approximately 20 miles from Downtown St. Louis. This 104 all-suites hotel was completed in 2002 and includes 40 studios, 42 one bedrooms, 22 two bedrooms, meeting space, business center, indoor pool, and fitness center. The hotel provides complimentary breakfast, a 24-hour sundry shop, full kitchens in all rooms and a shuttles that provides transportation to local businesses, the St. Louis International airport, and local events and attractions. Since opening, the hotel has developed a strong in-place cash flow with trailing twelve month Net Operating Income of $1.4 million. In March 2015, the hotel was substantially renovated completing its twelve year room renovation updating the hotel to the latest Residence Inn standards. The Residence Inn Earth City’s submarket is performing well with the trailing twelve month and year to date average daily rate growth of 6.2% and 7.5% respectively. Overall, the Earth City sub-market performs strongly due to its location near the airport, major employers, and location along a major interstate highway. The project is closing on a $12,000,000 first mortgage loan. At the time of the loan closing, the interest rate will be fixed at 4.25% during the loan term. The loan will have a 25-year amortization and be provided by either Midland States Bank. The principals of the Residence Inn Earth City are interested in raising $3.5 million of funds for the project and are offering an 8% preference on these funds along with a 45% participation in the cash flow and extraordinary income from the project. Upon receipt, the funds will be used to lower the existing debt, do some minor exterior renovation work, and be distributed to the principals. The principals will retain an ownership interest in the project. We believe the strong sponsorship, excellent physical improvements, and desirable sub-market for this property make this a very compelling investment opportunity.
Residence Inn St. Louis Airport / Earth City Property Photos
Residence Inn St. Louis Airport / Earth City Property Photos Typical Studio Suite
Newly Renovated Guestroom – Completed March 2015
Residence Inn St. Louis Airport / Earth City Property Photos Newly Renovated Guestroom – Completed March 2015
One Bedroom Suite with Fireplace
Residence Inn St. Louis Airport / Earth City Property Photos Newly Renovated Guestroom – Completed March 2015
Newly Renovated Guestroom – Completed March 2015
Residence Inn St. Louis Airport / Earth City Location Map
Residence Inn St. Louis Airport / Earth City
St. Louis Metropolitan Area Map showing location of the Residence Inn St. Louis Airport / Earth City hotel.
Residence Inn St. Louis Airport / Earth City Aerial
Residence Inn St. Louis Airport / Earth City aerial photograph showing easy access to the I-70 and I-270 freeway interchange at Rider Trail South and the proximity to the various businesses which occupy the Earth City / Maryland Heights Business Park. The hotel is also located five (5) miles from the St. Louis International Airport, and approximately 20 miles from Downtown St. Louis.
Residence Inn St. Louis Airport / Earth City Certain Proposed Key Terms of the Potential Investment Opportunity* Investment:
A limited number of Accredited Investors (as defined by applicable securities law) may be offered the opportunity to invest in the Residence Inn St. Louis Airport/Earth City hotel owned by the principals of Mullenix Hospitality Partners. The 104 room select service extended-stay property was developed in 2002 by the principals of Mullenix Hospitality Partners and completed its most recent renovation in 2015. The Residence Inn Brand is Marriott’s leading Select Service Extended-Stay Brand with nearly 700 hotels system wide, achieving 79.5% occupancy and an average of $139.45 in average daily room rate. The Residence Inn St. Louis Airport/Earth City is located next to I-70 (a main arterial interstate providing access to the St. Louis Airport and Metropolitan Area) and strategically located within the Earth City Business park, five (5) miles from the St. Louis Airport and approximately 20 miles from Downtown St. Louis. The hotel’s location in the northwest quadrant of St. Louis provides convenient access to major employers such as Boeing, US Bank, CCA Global, Sun Edison, United HealthCare, AT&T, the St. Louis Airport and government related Department of Defense business.
Owner:
Mullenix Hospitality Partners, LLC, a Missouri limited liability company
Control:
The Owner is controlled by Michael C. Mullenix
Investment:
$3,500,000
Investor Preference:
8.0% per annum, payable quarterly (and accrued with a priority repayment if funds from operations do not satisfy the preference)
Leverage:
The first mortgage loan for the property provide a 5-year term, $12,000,000 principal amount, 25-year amortization, and a fixed interest rate at 4.25%. This loan will be recourse to the principals of Mullenix Hospitality Partners and pre-payable at any time.
Distributions:
The distributions of both Operating Cash Flow and Extraordinary Cash Flow are described in Exhibit A
*These certain proposed key terms may or may not be included in the Subscription Agreement once available. In the event of any conflict between these proposed key terms and the Subscription Agreement, the terms of the Subscription Agreement shall control.
Residence Inn St. Louis Airport / Earth City Preliminary Financial Information
FINANCING RATIOS STABILIZED CASH FLOW NOI CAP. RATE CAPITALIZED VALUE LOAN TO VALUE LOAN AMOUNT
SALES ASSUMPTIONS NOI GROWTH RATE NOI IN YEAR 5 EXIT CAP RATE EXIT VALUE TRANSACTION COSTS NET SALES PROCEEDS MORTGAGE BALANCE SYNDICATED INVESTOR BALANCE SPONSOR EQUITY NET EXCESS PROCEEDS
$1,452,979 8.50% 17,093,874 70.20% 12,000,000
FIRST MORTGAGE DEBT ASSUMPTIONS 5 YEAR DEAL LOAN AMOUNT 12,000,000 RATE 4.25% AMORTIZATION 25 ANNUAL PAYMENT 780,103 DEBT COVERAGE RATIO 1.86x DEB YIELD 12.1% SYNDICATED INVESTOR INVESTMENT AMOUNT PREFERENCE RATE PAYMENT SPLIT
1.6% 1,547,210 8.50% 18,202,468 3.00% 17,656,394 10,498,216 3,500,000 1,480,600 2,177,578
3,500,000 8.00% 45.00%
TOTAL PROJECT CASH FLOWS PROJECT CASH FLOW BEFORE DEBT SERVICE FIRST MORTGAGE DEBT INVESTOR PREFERENCE CASH FLOW AFTER PREF AND FIRST MTG
8.00%
ANNUAL LOAN AMORTIZATION
YEAR 1 1,452,979 (780,103) (398,448) 274,428
YEAR 2 1,514,496 (780,103) (398,448) 335,945
YEAR 3 1,476,831 (780,103) (398,448) 298,280
YEAR 4 1,501,621 (780,103) (398,448) 323,070
YEAR 5 1,547,210 (780,103) (398,448) 368,659
275,427
287,363
299,817
312,810
326,367
YEAR 1 280,000 123,493
YEAR 2 280,000 151,175
YEAR 3 280,000 134,226
YEAR 4 280,000 145,382
YEAR 5 3,500,000 280,000 165,897
11.5%
12.3%
11.8%
12.2%
12.7%
403,493
431,175
414,226
425,382
SYNDICATED INVESTOR CASH FLOW EQUITY PROCEEDS / RETURN PREFERENCE 8.00% SPLIT CASH FLOW
(3,500,000)
ANNUAL CASH ON CASH RETURNS SALES PROCEEDS NET CASH STREAM INVESTOR IRR
(3,500,000) 16.1%
979,910 4,925,807
Residence Inn St. Louis Airport / Earth City Proforma Income Statement Forecast Year 1 Amount Rooms Available Room Nights Occupied Room Nights Occupancy ADR RevPAR Revenues Rooms Food & Beverage Telecommunications Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Telecommunications Other Expense Total Departmental Expenses Gross Operating Income
Forecast Year 2 Ratio
Amount
Forecast Year 3 Ratio
Amount
Forecast Year 4 Ratio
Amount
Forecast Year 5 Ratio
Amount
Ratio
104
104
104
104
104
38,064
37,960
37,960
37,960
37,960
30,912
30,748
29,609
29,609
81.2%
81.0%
-0.2%
78.0%
-3.0%
78.0%
0.0%
78.0%
0.0%
$120.28
$126.29
5.0%
$130.08
3.0%
$133.98
3.0%
$138.00
3.0%
$97.68
$102.29
4.7%
$101.46
-0.8%
$104.51
3.0%
$107.64
3.0%
29,609
$3,717,972
98.9%
$3,883,109
98.9%
$3,851,468
98.9%
$3,967,012
98.9%
$4,086,023
98.9%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
1,231
0.0%
1,537
0.0%
1,525
0.0%
1,571
0.0%
1,618
0.0%
38,693
1.0%
39,858
1.0%
41,054
1.1%
42,285
1.1%
43,554
1.1%
3,757,896
100.0%
3,924,504
100.0%
3,894,047
100.0%
4,010,868
100.0%
4,131,194
100.0%
690,379
18.6%
703,875
18.1%
684,584
17.8%
705,121
17.8%
726,275
17.8%
0
N/A
0
0.0%
0
0.0%
0
0.0%
0
0.0%
68,663
5577.8%
69,845
4543.1%
70,543
4626.2%
72,660
4626.2%
74,839
4626.2%
15,093
39.0%
15,943
50.0%
16,421
50.0%
16,914
50.0%
17,422
50.0%
774,135
20.6%
789,663
20.1%
771,548
19.8%
794,695
19.8%
818,536
19.8%
2,983,761
79.4%
3,134,841
79.9%
3,122,499
80.2%
3,216,173
80.2%
3,312,659
80.2%
280,827
7.5%
288,462
7.4%
291,346
7.5%
300,087
7.5%
309,089
7.5%
125,126
3.3%
128,528
3.3%
129,813
3.3%
133,707
3.3%
137,719
3.3%
115,881
3.1%
119,031
3.0%
120,222
3.1%
123,828
3.1%
127,543
3.1%
112,530
3.0%
115,289
2.9%
112,130
2.9%
115,494
2.9%
118,958
2.9%
285,786
7.7%
310,649
8.0%
308,117
8.0%
317,361
8.0%
326,882
8.0%
Undistributed Expenses Administrative & General Sales & Marketing Property Operation & Maint. Utilities Franchise Fees Management Fees Total Undistributed Expenses
130,737
3.5%
135,735
4.3%
134,821
4.3%
138,326
4.3%
141,936
4.3%
1,050,887
28.0%
1,097,694
28.0%
1,096,449
28.2%
1,128,803
28.1%
1,162,127
28.1%
Gross Operating Profit
1,932,874
51.4%
2,037,147
51.9%
2,026,049
52.0%
2,087,371
52.0%
2,150,532
52.1%
260,000
6.9%
267,800
6.8%
275,834
7.1%
284,109
7.1%
292,632
7.1%
44,301
1.2%
45,505
1.2%
45,960
1.2%
47,339
1.2%
48,759
1.2%
12,717
0.3%
39,245
1.0%
38,940
1.0%
40,109
1.0%
41,312
1.0%
12,561
0.3%
13,120
0.3%
13,252
0.3%
13,649
0.3%
14,059
0.3%
329,579
8.8%
365,671
9.3%
373,987
9.6%
385,206
9.6%
396,762
9.6%
Income Before Reserves
1,603,295
42.7%
1,671,476
42.6%
1,652,063
42.4%
1,702,165
42.4%
1,753,770
42.5%
Replacement Reserves
150,316
4.0%
156,980
4.0%
175,232
4.5%
200,543
5.0%
206,560
5.0%
$1,452,979
38.7%
$1,514,496
38.6%
$1,476,831
37.9%
$1,501,621
37.4%
$1,547,210
37.5%
Fixed Charges Property Taxes Insurance Asset Management Fee Leases Total Fixed Charges
Net Operating Income Unleveraged Return Flow Through:
8.6%
Note: FF&E Reserves for the hotel are budgeted at 5% of Total Revenue
8.9% 62.6%
8.7% 63.6%
8.8% 52.5%
9.1% 52.5%
Residence Inn St. Louis Airport / Earth City Source and Use of Funds USE OF FUNDS
$ Amount
First Mortgage Loan Payoff First Mortgage Fees Mezzanine Loan Payoff Mezzanine Fees Other
Sub-Total
Acquisition Hotel Purchase Price Site Prep Costs SUBTOTAL
$
-
Per Room 104 Rooms
Per Sq Ft 71,386 Sq Ft
94.8% of Total Cost
16,100,000 16,100,000
154,808 154,808
225.53 225.53
Building Costs Capital Reserve Exterior Painting Equipment Mechanical Supplies FF&E Design Fees Contingency - Constr Only SUBTOTAL
5.0% Project Cost 2.5% of Total Cost
200,000 95,000 105,000 20,000 420,000
1,923 913 1,010 192 4,038
2.80 1.33 1.47 0.28 5.88
Soft Costs - Improvements Developer Fee Construction Management Fee SUBTOTAL
0.0% of Total Cost 0.1% of Total Cost 0.1% of Total Cost
16,000 16,000
154 154
0.22 0.22
1.0% of Total Cost
50,000 120,000 170,000
481 1,154 1,635
0.70 1.68 2.38
30,000 10,000 175,000 50,000 9,600 274,600
288 96 1,683 481 92 2,640
0.42 0.14 2.45 0.70 0.13 3.85
16,980,600
163,275
237.87
$ Amount
Per Room
Per Sq Ft
$ $ $ $ $ $
12,000,000 4,980,600 -
115,385 47,890 -
168.10 69.77 -
TOTAL
$
16,980,600
163,275
237.87
Balance
$
Other Soft Costs FM Interest Reserve Working Capital Existing A/P Payoff Franchise Application Fee Appraisal Reports Survey SUBTOTAL Closing Costs Lender Origination Fee Lender Legal & Due Diligence Costs Broker Fees - Lender Equity Fees Equity Legal/Closing Costs Title Policy Zoning & Licensing Contingency - General SUBTOTAL
0.25% of Total Loan
0.0% of Total Cost 1.6% of Total Cost TOTAL
$
SOURCE OF FUNDS First Mortgage Loan SBA Loan Cash Equity Historic Tax Credits City Incentive New Market Tax Credits
70.7% 0.0% 29.3% 0.0% 0.0% 0.0%
-
Mullenix Hospitality Partners, LLC. Senior Management
Michael C. Mullenix
Gregory S. Mullenix
Chief Executive Officer / Founder 20+ yrs Industry Experience
Chief Development Officer 20+ yrs Industry Experience
Conor G. Pandl
Michael P. Manna
Vice President – Investments 10 yrs Industry Experience
Corporate Controller 25+ yrs Industry Experience
Mohammed Kashif
Madeleine N. Leritz
Corporate Director of Hotel Operations
Corporate Associate 5+ yrs Industry Experience
25 yrs Industry Experience
Mullenix Hospitality Partners, LLC. Hotel Portfolio & Pipeline HOTELS - OWNED / MANAGED (Current Portfolio)
Keys
HOTELS - UNDER DEVELOPMENT (Anticipated Opening Date)
Keys
1 Fairfield Inn & Suites St. Charles, Missouri
80
1 HOME2 Suites Leavenworth, Kansas
2 Hampton Inn & Suites Clayton, Missouri
106
2 TownePlace Suites Brentwood St. Louis, Missouri
Spring 2018
3 Homewood Suites St. Louis Galleria Richmond Heights, Missouri
158
3 Brand TBD St. Louis (Downtown), Missouri
Fall 2018
4 Residence Inn St. Louis Airport / Earth City Earth City, Missouri
104
4 Brand TBD St. Louis / Clayton, Missouri
Planning Phase
5 TownePlace Suites St. Charles, Missouri
93
6 Residence Inn Alexandria Old Town / Duke St. Alexandria, Virginia
240
Total OWNED / MANAGED
781
Total UNDER DEVELOPMENT
Total Portfolio HOTELS - DEVELOPED (Sold / No Longer Managing)
Keys
1 Fairfield Inn St. Louis / Fenton Fenton, Missouri
106
2 TownePlace Suites St. Louis / Fenton Fenton, Missouri
95
3 TownePlace Suites Park 100 Indianapolis, Indiana
95
4 TownePlace Suites Keystone Indianapolis, Indiana
83
5 Fairfield Inn & Suites Northwest Indianapolis, Indiana
79
6 Fairfield Inn & Suites East Indianapolis, Indiana
63
7 Residence Inn St. Louis Downtown St. Louis (Downtown) Missouri
188
8 Homewood Suites St. Louis Riverport Maryland Heights, Missouri
104
9 Hotel Ignacio St. Louis (Downtown), Missouri
51
Total DEVELOPED / SOLD
864
Summer 2017
107 127 130 230
594
2,239