Boutique Hotel Repositioning in NJ

Existing assets generally with little need for capital improvements, typically in major metros, with high occupancy, longer weighted average lease term (WALT), creditworthy tenants, and rents near or above market rate.

Existing assets with typically attractive occupancy rates, but with the potential to increase cash flow or property value through light improvements, operational efficiencies, and slight increases to the amount or quality of tenants, or rental rates.

Projects requiring significant investment, improvement, and oversight to achieve goals, likely including interior and exterior renovations, operational efficiencies, leasing risk, increasing undervalued rents, and the likelihood of higher leverage.

Note: Designations are defined independently by CrowdStreet. These designations may differ from the offering documents or common industry designations. For more details regarding the specific strategy and objective for a particular deal, reference offering documents.

Project could require heavy redevelopment, full development, or repositioning to reach its highest potential value. Other situations include distress, major tenancy issues, or other risks requiring drastic intervention from a new sponsor.

Development is considered a subset of opportunistic real estate and has many moving pieces that cause these projects to be high on the risk profile. These risk factors can include pre-development risk (surveys, permitting, entitlement), vertical construction risk, arranging permanent financing, leasing, hiring property management, and so forth. 

Development deals also don't provide cash flow during the construction phase–only when the property is fully constructed and stabilized can it generate income. On the flip side, development projects often target higher targeted returns than other CRE projects.

The Internal Rate of Return (IRR) is the rate at which each invested dollar is projected to grow for each period it is invested. It differs from other metrics in that it accounts for the concept of the “time value of money”, or the fact that a dollar received and reinvested elsewhere today is worth more than a dollar expected to be received and reinvested next year. The IRR is one of the best ways for an investor to compare various investments based on their yield while holding other variables constant.

In commercial real estate, the equity multiple is defined as the total cash distributions received from an investment, divided by the total equity invested. Essentially, it’s how much money an investor could make on their initial investment. An equity multiple less than 1.0x means you are getting back less cash than you invested. An equity multiple greater than 1.0x means you are getting back more cash than you invested. For instance, an equity multiple of 2.50x means that for every $1 invested into a CRE project, an investor could be expected to get back $2.50.

Equity Multiple Formula

Equity Multiple = Total Cash Distributions / Total Equity Invested