Creating a bidding contest: Baymont Inn — Lafayette, IN
Property: Baymont Inn
Market: Lafayette, Indiana
Property Attributes
This property was built in 1999, and was owned and operated by its original developer prior to its sale. Located 125 miles from Chicago and 65 miles from Indianapolis, the hotel also benefited from excellent interstate visibility and its close proximity to Purdue University.
| Year 1 | Year 2 | Year 3 | |
| A.D.R. | $62.85 | $61.34 | $61.79 |
| Occupancy | 55.2% | 58% | 52% |
| RevPar | $34.67 | $35.55 | $32.11 |
| Room Revenue | $974,377 | $999,034 | $902,544 |
| Total Revenue | $996,915 | $1,028,592 | $931,074 |
| NOI | $156,038 | $194,497 | $150,344 |
*NOI expressed after deductions for FF&E Reserve and Management Fees.
Owner Objective
The owner’s desired outcome was to dispose of the hotel as part of an amicable partnership dissolution at a maximized value. Since the property had performed consistently since its opening, the owner was not under any pressure to sell.
From a buyer’s perspective, the hotel faced numerous future challenges. The property’s excellent location was offset because of the significant competition at its exit, which included more than ten other hotel properties. In addition to being in close proximity with its direct competition, the property also suffered from being located in a market that was overbuilt. The brand was also widely considered to be one of the weaker franchises for the area. Lastly, the property’s NOI was just enough to cover debt service at list price, making some buyers skeptical of their ability to obtain financing for the project.
Sales/Marketing Process
Through a marketing approach that targeted Midwestern limited-service hotel owner operators with mid-tier or economy franchises, and regional management/ownership companies, Hotel Source, Inc. was able to attract significant buyer interest through the initial marketing materials. Hotel Source used personal contact and weekly showings to procure offers from more than 15 buyer groups.
Negotiations
Hotel Source then spent significant time qualifying buyers through contact with their lenders, and reviewing previous hotel ownership experience. Upon execution of the contract, Hotel Source assisted the buyer in transfer of the licensing agreement with the franchise.
Conclusion
The property sold at 93% of the list price and a 5.8% cap rate. The seller received a price that satisfied the partners and the buyer received a well-located property, in excellent condition, with upside potential.