The First Hotel for Groups

Background

In early 2019, New Orleans’ developer Urban Properties noticed something interesting:

Across all their STR listings, their large-format units (+3BR) consistently outperformed their standard units on revenue and occupancy. They were producing far greater cash-flows and returns.

“We need to do more of these.”

This was the only logical next thought. But there was a problem.

Unlike more developed cities with large-format apartment and condo supply, New Orleans large-format supply came almost entirely from old, Victorian mansions in residential areas.

Not only did this present an operations problem at scale, trying to manage multiple units spread across different neighborhoods, but angry neighbors and increasing regulation posed a serious threat to new and existing residential STR properties.

But they saw another option.

Opportunity

Urban Properties found a perfect opportunity in an off-market building directly on the St Charles Ave streetcar line and within walking distance to the city’s top attractions.

The building was big enough to fit multiple large-format units and a rooftop pool and bar, ground floor cafe and traditional hotel lobby common spaces.

And it was in commercial zoned, eligible for a hotel license to protect from STR regulation.

After negotiating terms with the seller, they got the building under contract.

This is where the work began.

Challenge

The building was converted from hotel to office in 1987. So the team had to come up with a plan to turn the 20,000sf into a collection of high-performing STR units.

Because of the building's configuration and historic renovation requirements, this wouldn’t be as simple as “let’s do five 5BR units per floor.”

Having worked with its founder in the past, Urban Properties engaged Aircalc to help:

• Analyze the Large-Format Competition
• Draft a Program of Spaces incl Unit Sizes and Layout
• Raise the $15M Needed to Complete the Project

Solution

Analyze the Large-Format Competition

Urban’s first order for the Aircalc team was a market overview report. Together, they used this to:

• Find and Analyze Key Large-Format Comps
• Identify Common Patterns in Top Performers
• Assess Optimal Unit Bedroom / Bath Count
• Form Upside, Base and Downside Assumptions

Back of the napkin returns looked strong and the competition seemed more than beatable. Urban Properties was ready to move forward.

Draft a Program of Spaces incl Unit Sizes and Layout

Confident in the project's viability, they hired a top architect to begin drafting plans. Key insights they gleaned from their Aircalc comp analysis helped them make critical decisions on unit size and count such as:

• Connecting Doors for 3BR + 2BR to make 5BRs
• Opening Up Two Floors to Make One 9BR
• Prioritizing Pool and Amenities in Budget
• Deprioritizing Kitchen and Dining Spaces

Raise Capital

When it came time to finance the deal, Aircalc created the financial model and projections used to close their $5M equity raise.

Additionally, the Aircalc market and comp analysis served a critical role in closing their $9M loan. 

See what the appraiser had to say below:

"This is the most thorough analysis I've seen out of all the hotel projects I've underwritten in New Orleans."

Outcome

Urban’s successful engagement with Aircalc resulted in:

• Team’s strong understanding of competitive market
• Key decisions on hotel concept and programming
• Completion of a successful $14M capital raise

‍Testimonial

“Urban Properties development business is run by its 4 partners. We didn’t have time to do the analysis ourselves nor did we want to. Aircalc’s speed, thoroughness and commitment to seeing the project through to a successful outcome really impressed us. They were bought in from day 1 and there deliverables helped us make key decisions throughout the process. We certainly will be using them again.”

‍