Financing and developing a hotel in the current lending environment is no walk in the park, with high inflation and interest rates serving as two major roadblocks to getting a new development off the ground.
Will Moncrief, founder and CEO of Dallas-Fort Worth-based hospitality company Sidecar Suites, and Dave Jacoby, founder and managing principal at SOAR Advisory Services, have both bucked this trend recently, opening hotels within the past few years. Moncrief and Jacoby joined the Next Gen in Lodging podcast to share how they were able to come up with the requisite funding for their projects.
Jacoby purchased what is now the Hotel Lucine in Galveston, Texas, back in 2021. He started a friends and family fund that is composed of more than 60 individual investors, each of which contributed $50,000 or less to the property. The funding split was 60% debt and 40% equity.
“I kind of liked this model because everyone that’s an investor in this project is either in hospitality in Houston or Austin or one of our feeder markets or in a creative industry that has some relation to or connection with Hotel Lucine,” he said. “That allows us to essentially have an ambassador network built in from the opening of this project.”
Moncrief also went the friends and family fund route to cover the initial land value and soft cost when he was purchasing land for his project of 31 casita villas and six Airstream trailers. He then used $12 million in bank financing to get the deal done. The funding split on Moncrief’s deal was 70% debt and 30% equity.
Even with this funding, Moncrief said he doesn’t like to rely on friends and family. In this case, they were the ones reaching out to him to help.
“It’s important for you to go to the people closest to you initially, if for anything else, for other contacts and resources to express, ‘Hey, we’re building something special here,’” he said. “It certainly wasn’t a position where you’re going out with open hands out, looking for some help. It’s more so folks coming to us that were very close and wanted to be a part of it and really believed in the vision.”
For more from Moncrief and Jacoby, listen to the full podcast at the link below.
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