In 2017, Principals of Dominion Hospitality Group, LLC (DHG), a subsidiary of Dominion Diversified Real Estate Group, identified and purchased this 99-room Comfort Inn at a purchase price of $8,850,000 (3.25 multiple on 2016 room revenues of $2,727,000). With all-in acquisition cost of $9,400,000 based on a projected Net Operating Income of $1,010,269 in 2017, this represents an 11% capitalization rate on the total transaction cost. The cost to the Seller’s trailing 2016 NOI represents a 14.5% cap rate.
DHG made an effort to be conservative in our entire underwriting. The price per key of $95,000 includes a Property Improvement Plan Reserve (PIP) of $250,000 and is far below replacement cost and includes the sponsor agreeing to partially pay existing loan defeasance cost. The sellers were a family-run operation based in Williamsburg, VA that wanted to dissolve a stressed operational relationship with the current GP on site and focus on new development in Williamsburg.
The Principals of DHG raised close to $3,000,000 in Equity and obtained conventional bank financing to acquire this asset.
Post-acquisition, the property has undergone a full exterior renovation including the building of an exterior elevator per brand guidelines and is now proceeding to enhance the interior per brand PIP standards.
DHG took over the management of this property in late 2018 and is in the process of turning the asset performance matrices to the level that distributes to its investors quarterly.