Spark by Hilton Conversion Opportunity

• New ownership will be required to rebrand the hotel at closing.

• The Spark by Hilton franchise is available, and the seller has provided a copy of the conversion property improvement plan (PIP), which can be found in the virtual deal room (VDR).

• Current estimates for the Spark conversion are approximately $20,000 per key, or $1.34 million (rounded).

• Given that the Hobbs market caters to working-class, oil-and-gas (O&G) clientele, the Spark by Hilton brand is uniquely positioned to capture midscale room-night demand; thus, no negative impact on rooms revenue would be expected upon the conversion.

Operational Upside Potential for a Robust Operator

• Per the trailing-twelve-month (TTM) July 2024 profit-and-loss (P&L) statement, the hotel’s gross operating profit (GOP) was 29.6%, with a net operating income (NOI) flow-through of about $434,000 (rounded). Great upside exists for a more “hands-on” operator to restructure the hotel’s operations to maximize NOI flow-through.

• Based on a selection of similar vintage Hampton operating statements, the hotel should achieve a stabilized GOP margin between 44.0% and 47.0%.

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

• In comparison to other markets across the country, New Mexico’s property tax rates have historically been lower. For example, the hotel’s annual property tax expense averaged $15,000 per year ($232 per key) over the last five years.

Increasing Revenue Trend & Stable Operating History

• The hotel’s rooms revenue for the TTM period through August 2024 increased by 10.4%, compared to the same period last year.

• From 2021 through 2023, rooms revenue consistently averaged over $1,700,000.

Attractive Rooms Revenue Multiplier (RRM): 2.7x

• Based on the $5,200,000 pricing guidance, the hotel asset underwrites to an attractive 2.7x RRM based on the TTM August 2024 rooms revenue.

Ideal Location in Strong-Performing Oil & Gas Market

• West Texas Intermediate (WTI) prices have ranged from $70 to $80 a barrel to over the last six months.

• The Permian Basin underlies Lea County, which ranks #1 in oil production across the country.

Diverse Mix of Demand Sources

• Opportunities exist for group business from local educational institutions, energy companies, and hospitals.

• Approximately 1,500 passengers travel through Lea County Regional Airport in Hobbs monthly.

• Leisure demand generators in the area include the Western Heritage Museum & Lea County Cowboy Hall of Fame, Lea County Center for the Arts, and Harry McAdams State Park.

• Zia Park Casino Hotel & Racetrack, located within a five-minute drive of the property, attracts 2.2 million visitors annually given that Hobbs is located along the Texas/New Mexico border.

• Major employers in the area include Halliburton, ConocoPhillips, Chevron, Baker Hughes, Lea Regional Medical Center, Patterson-UTI Drilling Co., Ferguson Construction, and Key Energy Services.

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 $110,000 to $130,000 per key.

• This opportunity presents an investor with the ability to acquire the property at a price well below replacement cost, at $77,000 (rounded) per key.