Operational Upside Potential for a Robust Operator

• Based on the year-end 2023 financial statement, the hotel achieved a 28.6% gross house profit with a $247,000 (rounded) NOI flow-through. Great upside exists for a more “hands on” operator to restructure the hotel’s operations to maximize RevPAR penetration and NOI flow-through.

• Based on a selection of similar vintage Holiday Inn Express & Suites operating statements, the hotel should achieve a stabilized GOP margin between 44.0% and 50.0%.

• We see multiple opportunities for improvement that could lead to a collective decrease in rooms expense, specifically in the payroll department.

• Current ownership encountered issues while completing the recent property improvement plan (PIP), particularly given the guestroom inventory that needed to be taken offline during the renovations, with a 34.0% reduction in available rooms in 2021, followed by a 20.0% reduction in 2022. However, after completing the renovations early last year, the hotel’s rooms revenues improved significantly, increasing by 30.0% in 2023 (compared to 2022).

• Per the STR report, the hotel’s RevPAR increased 7.0% during the trailing-twelve-month (TTM) period ending May 2024, whereas the competitive set’s RevPAR decreased 9.0%, indicating that the hotel is capturing more market share.

• Based upon the HVS pro-forma projections, stabilized rooms revenue in 2025 is anticipated to be in excess of $2.4 million, with an NOI flow-through of $765,000 (rounded).

Robust Oil & Gas Market

• Local refineries and chemical plants operated by major entities, such as Chevron Phillips and ExxonMobil, represent primary economic anchors.

• As part of ExxonMobil’s larger ten-year, $20-billion “Growing the Gulf” expansion program, ExxonMobil added a new ethane cracker unit in 2018 and invested $2 billion in the expansion of its chemical complex in Baytown.

• In 2023, LyondellBasell officially started operations at its new, $3.5-billion propylene oxide (PO) and tertiary butyl alcohol (TBA) plant, the largest in the world, boasting an annual capacity of 470,000 metric tons of PO and 1,000,000 metric tons of TBA and its derivatives.

• OxyVinyls, the chemical division of Occidental Petroleum, has set in motion a planned $1.1-billion expansion of its chlor-alkali plant in La Porte.

• The Bayport Container Terminal is undergoing a $200-million investment project to update its storage facilities and infrastructure, including the addition of a new, 1,000-foot wharf to aid in the expected increase of cargo volume in the coming years.

Strong I-10 Location near Corporate and Leisure Demand Generators

• The property is strategically located at the Garth Road Exit along Interstate 10, a heavily developed commercial corridor in Baytown.

• Corporate demand generators in the area include the ExxonMobil Baytown Complex, Chevron Phillips Chemical Cedar Bayou Facility, Enterprise Products Partners Mont Belvieu Complex, Energy Transfer Fractionation and Storage Facility, Targa Logistics & Transportation Segment Facility, Covestro Baytown Facility, Calpine Baytown Energy Center, Walmart Distribution Center, JSW Steel, The Home Depot Distribution Center, the Houston Ship Channel, Frontier Logistics LP, Occidental Petroleum, The Dow Chemical Company, and Baker Hughes.

• Leisure demand generators include the Baytown Nature Center, San Jacinto Monument, Battleship Texas, Bicentennial Park & Veterans Memorial Plaza, Eddie V. Gray Wetlands Center, Fred Hartman Bridge, Lee College Performing Arts Center, Lynchburg Ferry, Pirate's Bay Water Park, Yepez Vineyard, and Lee College, as well as myriad youth sports venues, golf courses, and water-related activities.

• Special events also typically play a role during key weekends, such as The Great Harvest Festival, Baytown Heritage Scaritage Festival, and HSA Invitational Tournament.

Holiday Inn Express & Suites Franchise

• Upon approval from the franchisor and completion of the brand-mandated change-of-ownership PIP, an investor can expect a new, long-term, 15-year license agreement with InterContinental Hotels Group (IHG).

• The PIP report from October 2023 has been uploaded to the virtual deal room. While this PIP report is outdated, it is expected to remain the same when formally updated by IHG.

• Based on initial estimates, the PIP is budgeted to cost approximately $10,000 per key or $910,000.

• This presents a new owner with the opportunity to operate a hotel with one of IHG’s most prominent limited-service products. The brand’s success is largely attributed to IHG’s award-winning advertising campaigns and consumer awareness.

• The award-winning IHG® Rewards Club loyalty program is one of the largest in the hotel industry, offering members more choices to redeem their points than any other hotel loyalty program in the world. Serving over 100 million enrolled members worldwide, IHG Rewards Club is an effective tool for driving customers to IHG hotels and creating brand loyalty.

Discount to Replacement Cost

• To construct a similar limited-service hotel asset with comparable amenities, the estimated all-in investment would be a minimum of $150,000 per key.

• This opportunity presents an investor with the ability to acquire the property at a price well below replacement cost at $93,000 per key (rounded).

Management Availability

• The hotel asset is being offered free and clear of any management encumbrances, providing an investor with the flexibility to revamp the operational strategies of the current operator.