Private Equity Real Estate Investment Offering For Boutique Hotel In Sonoma County's Wine Region

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The private equity real estate investment platform CrowdStreet launched a new offering for The Sandman Santa Rosa Hotel, with a targeted investor internal rate of return (IRR) of 17%.

The 135-key independent hotel is situated on 2.79 acres in the heart of Santa Rosa, CA. The hotel serves as an ideal launchpad for visitors exploring Sonoma’s renowned wine country region.

Investment Highlights: The offering is being sponsored by Yang Capital, a boutique real estate investor that has owned the property since 2015. The sponsor is raising up to $7,995,000 to capitalize the hotel at a roughly 15% to 20% discount to its current value.

The proceeds of the offering will be used to pay off existing mezzanine debt and to implement a $3 million renovation that includes certain interior renovations to hotel units, exterior beautification and improvements to certain common areas.

Minimum investment: $25,000
Target investor IRR: 17%
Target equity multiple: 2.1x
Target average cash yield: 9.4%
Target investment term: 5 years

Benzinga’s Take: The hospitality industry was one of the hardest hit through the COVID-19 pandemic, making hotels an ideal opportunity as we enter the next phase of the recovery.

The sponsor has taken a conservative approach to underwriting this deal, assuming an average occupancy rate of 67.1% after renovations, even though the company has averaged 67% occupancy over the past three years.

The property also has conservative leverage at 43% leverage-to-cost and a high average debt service coverage ratio of 4.45. This means significant downside protection for investors, along with the potential to outperform target returns.

Find more information on this offering and other private equity real estate investments through Benzinga’s Offering Screener.

Photo: Courtesy of CrowdStreet

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