In 2018, the Principals of Dominion Hospitality Group, LLC (DHG) identified and acquired this 83-room Comfort Suites built in 2006 at a purchase price of $7,450,000 ($550,000 off of the asking price of $8,000,000, which represents a 4 multiple on 2016 room revenues of $1,800,000). With an all-in acquisition cost of $7,850,000 based on a projected Net Operating Income of $788,751 in 2017, this represents a 10% capitalization rate on the total transaction cost. The cost to the Seller’s trailing 2016 NOI represents an 11% cap rate relative to the purchase price.
As always, DHG tried to be conservative in our entire underwriting. The all-in price per key of $94,578 is far below the market replacement cost of $125,000 per key. The current owners are based in Tennessee and this asset represents their only holding in Georgia, hence their reason for selling.
Most important to note, the current owners completed the “Yours Truly” Choice renovation package in 2016 and replaced the roof in the same year. Occupancy rates have been stable despite having rooms down for renovations and the I-95 Port Wentworth interchange interruption due to a major construction upgrade—proof of the growing demand in the area. Monthly variance ranges from a low of 47% to 83% on a monthly basis in the last calendar year, offering Break Even Point stability from a cash flow perspective.
This very well maintained hotel sits just off of I-95 at Exit US Route 21, north of Savannah proper. The site is located near one of the largest ports on the Eastern Seaboard and within 10 minutes of the airport, with demand generators such as Gulfstream, Home Depot, Rock Tenn, Georgia Pacific, Honeywell, and Tanger Outlet Mall.
The property’s original manager was terminated in 2018 and DHG implemented a full employee review and replacement program in a turnaround effort. We are pleased to report that this asset’s 2019 revenues are trending ahead of 2018 and look strong for the year as our sales team made a concerted effort to gain business bookings lost in 2018 and now manages the rates several times a day.