The Joint Venture acquired the hotel, formerly The Quincy, in October 2015 and immediately rebranded it as the Hotel RL Washington DC. The hotel will benefit from a $2,935,000 ($29,700/room) renovation program which will be completed during the first quarter of 2016. The prior owners spent over $8,000/room over the past three years on upgrades and various building systems including their own $3,000/room soft goods renovation in 2014. It is currently being marketed through Red Lion’s reservation system. Hotel RL is unquestionably one of the most unique and exciting new brands within the full-service, luxury boutique hotel sector.
The overall business plan entails executing a value creation strategy consisting of:
1) upgrading the Hotel though a $2.935 million ($29.7k/room) renovation program focused on the lobby and common areas
2) increasing the Hotel’s average daily rate through targeted marketing to higher rated transient segments
3) enhancing operational efficiency and profit margins
4) generating additional revenue by fully utilizing the Hotel’s underground parking garage and re-tenanting the Mackay’s restaurant with a higher paying tenant that complements the Hotel RL brand.
The building was constructed in 1965 and includes 99 spacious guest rooms; lobby, meeting space, business center, underground parking garage, and two independently operated leased restaurants (Mackay’s Public House at street level and Recessions Pub on the lower level). Guests also enjoy access to an adjacent parking garage and complementary use of a nearby Gold’s Gym.
The Sponsors plan to vastly improve this under-managed asset and apply Red Lion’s operational and marketing expertise to grow average daily rates and improve operating margins and profitability. The Sponsors will replace Mackay’s which only pays about 50% of market rent with a new tenant that will enhance guest experience and image at the hotel. The underground parking garage, mostly used by employees and for storage will be converted to a valet garage for hotel guests and significantly increase parking revenue.
The Hotel and its competitive set’s average occupancy exceeded 80% between 2010 and 2013 and increased to the mid 80’s starting in 2014. The upward pressure on occupancy combined with the absence of new supply bodes well for sustained average daily rate growth throughout the investment period.
Situated in the heart of downtown Washington, DC one block off the K Street corridor and a short walk to the White House, the immediate area known as the Golden Triangle hosts the District’s top law, lobbying and government related firms providing a steady source of business and leisure travel. Two lines of the DC Metro have stops within two blocks of the Hotel.
The Golden Triangle is a premier and unparalleled business location. Just steps away from the White House and National Mall, the Golden Triangle is 43 blocks of prime DC real estate where businesses prosper with a steady mix of workers, residents and visitors. Access, amenities, resources, and a comfortable working environment make the Golden Triangle a world-class neighborhood.
It is home to more than 3,000 organizations such as top law firms, lobbyists, associations, and architecture firms; 200 restaurants; 300 shops and retailers; 7 hotels; and 6 national parks. Through a special assessment collected from property owners in a 43-block area, the Golden Triangle BID promotes and supports this area of downtown Washington DC through a number of services that include an Ambassador program focusing on cleanliness and hospitality, homeless outreach, streetscape improvements, marketing, outdoor summer concerts and other events, member services and more. Businesses that are located within the boundaries of the Golden Triangle BID are automatically members of the BID. The BID is governed by a Board of Directors composed of twenty-four property and business owners.
The neighborhood is home to high end national apparel retailers including Brooks Brothers, Burberry, Thomas Pink, Rizik’s and Charles Tyrwhitt. These and other upscale retailers in the neighborhood perform at the very top of their brands across the region and nation. The Golden Triangle’s superb multimodal transportation infrastructure gives it some of the highest pedestrian, auto and Metro ridership counts in DC. Three of the top six busiest Metrorail stations are located in the neighborhood.
The Golden Triangle is one of the most convenient destinations in Washington, with more than 25,000 parking spaces, walkability to nearby residential neighborhoods such as Dupont Circle, and easy vehicle accessibility to Virginia, Maryland and other parts of the District. This enables businesses to attract the best and the brightest employees and clients and enables retailers to attract customers from across the region. At the core of the Golden Triangle is a four block long raised median that lends character to the neighborhood, creating a destination and sense of place with stunning seasonal plants and programmable light art.
WHO WE ARE
Shelbourne Capital, LLC
Shelbourne Capital LLC is a real estate investment firm focused on opportunistic investments in commercial real estate throughout the United States. We leverage our relationships, knowledge and experience across a broad spectrum of potential investments. Typically we strategically invest alongside experienced operating partners. Our highly experienced team is able to source, structure and finance transactions with the goal of achieving superior, risk-adjusted returns for our investors.
We believe that the foundation of our success is based upon implementing creative strategies that unleash hidden value in properties missed by the larger market. These opportunities often involve assets that require development, repositioning, refurbishment or restructuring, as well as those held in illiquid ownership structures or owned by motivated sellers.
Falcon Investors, LLC
Falcon Investors is an opportunistic real estate investment platform with a nationwide focus owned and founded by David Reis (see bio). Falcon has co-invested in every one of Shelbourne’s hotel deals, and its principal, David Reis, also developed, owns and is the managing member of St. Regis Deer Valley, Utah. In addition to hospitality investment, Falcon, through its principals, has developed over $500 million of senior living facilities spanning the continuum of care from nursing homes to assisted living communities and full-service continuing care retirement communities.
Shelbourne Falcon Investors
Shelbourne Capital and Falcon Investors created a partnership, Shelbourne Falcon Investors, to co-invest in opportunistic hospitality deals such as the Hotel RL Washington DC.
Joint Venture – RLS DC Venture LLC (“Joint Venture”)
In early 2015 Red Lion Hotels Corporation (RLHC) and Shelbourne Falcon entered into a Joint Venture in which RLHC sold a 45% stake in 12 of its hotels containing 2,531 rooms to a Shelbourne Falcon affiliate. The entire transaction totaled $123 million including $26 million to renovate these hotels. After paying off existing debt, RLHC will use the balance of the funds to aggressively pursue subsequent acquisitions such as the Hotel RL in Washington DC. These prior collaborations, along with the current Joint Venture, will create a dynamic synergy that will be laser focused on successfully introducing a brand new Hotel RL to the Washington DC market.
Since the firm’s founding in 2009, Shelbourne and its affiliates have invested in transactions representing over $650M in total capitalization.
From 2009 to 2013, Shelbourne partnered with Richfield Hospitality to acquire and invest in fundamentally sound hotels which were mismanaged or improperly positioned. The partnership acquired several full-service hotels in strategic markets with strong economic drivers.
In 2014, Shelbourne Falcon formed a Joint Venture with RLHC to recapitalize their existing core portfolio of owned hotels. This Joint Venture has expanded to include a pipeline of future acquisitions and developments as Shelbourne Falcon is RLHC strategic capital partner. RLHC and Shelbourne are together actively evaluating opportunities in the top national lodging markets.
In total, Shelbourne currently owns 18 hotels comprising over 3,600 rooms in markets across the United States. The entire portfolio generates approximately $100 million in revenues and approximately $20 million in NOI. Across the entire portfolio total revenues and NOI are up 11% and 36%, respectively.