DALLAS--(BUSINESS WIRE)--Varro Hospitality, LLC (Varro) announced today that its RealShares online investment platform for individual investors has debuted and launched its first investment opportunity with the Urbana Varro Opportunity Fund II (the fund). The professionally managed fund focuses on value-add and opportunistic hotel investments—asset classes that are typically reserved for institutional investors versus individual investors.
With a $25,000 minimum investment, accredited investors in the fund can gain a stake in a diversified portfolio of hotel properties, all carefully selected by fund managers for optimal risk-adjusted returns. The fund is co-managed by Varro and its strategic partner Urbana Holdings, LLC (Urbana).
Prior to the portal launch, investors have contributed approximately $7.1 million toward the $10 million capital goal, and the first of several portfolio properties was acquired in October 2014: the full-service, 311-room Sheraton Arlington Hotel in the heart of the entertainment district in Arlington, Texas. The fund anticipates bringing three to four properties under ownership, all of which would be managed by an affiliated entity.
“RealShares provides individual, qualified investors an opportunity to invest in institutional-grade hospitality properties and take advantage of the power of the one night lease—the agility to measure performance and change offers on a daily basis to maximize revenue potential,” said Jeremy Soder, Varro’s chief marketing officer. “Our team professionally manages the entire process from opportunity analysis and acquisition to hands-on property management and, ultimately, well-timed divestiture. By retaining control of the entire scope of the investment, we keep the focus where it belongs: On achieving the highest possible returns for our investors.”
Premium-brand hotels are in demand. Year-end 2014 metrics found that U.S. hotels are now selling 64.4 percent of their room nights, up from 3.6 percent year-over-year, according to travel-research company, STR Inc. Guests are also paying more: $115.32 on average a night, up 4.6 percent, and revenue per available room increased 8.3 percent to $74.28, per STR’s research.*
The strategy for the Urbana Varro Opportunity Fund II is to acquire, develop and operate a diversified portfolio of hospitality properties on a national basis, focusing on full-service hotels which can be acquired below replacement cost and development opportunities which represent a highly-attractive investment opportunity. Additional investment opportunities may include select-service and extended-stay properties, which are located in strong submarkets that are stabilized or undergoing positive economic or political changes.
According to Soder, “This is an exciting time in the hospitality investment market. Demand for rooms is high and supply is low because, among many factors, new construction stalled during the recession. Another driver is that many hotel owners can’t find capital to refinance mortgages or are not interested in paying for the needed capital improvements to support their premium brands. As an approved management company for Marriott, Starwood and Hilton, we are well positioned to leverage these types of opportunities. We make the necessary improvements to maximize a ‘heads in beds’ business model, where revenue and value are driven by occupancy and guest satisfaction, then sell the enhanced properties when conditions are right to extract maximum value for our investors.”
Urbana Varro’s first fund, the Urbana Varro Opportunity Fund I, which is fully funded and closed to new investors, has exceeded operating performance expectations for eight consecutive quarters in all categories: revenue, house profit, net operating income, occupancy, average daily rate and revenue per available room. The fund owns one Hilton Hotel and five TownePlace Suites by Marriott properties located in Texas and the South. Since inception in 2011, the Fund has returned more than $1.75 million in distributions to investors. Year-end 2014 results showed year-over-year improvements of approximately 7 percent for average daily room rates (ADR) and 10.6 percent for revenue per available room (RevPAR), both exceeding projections as well as occupancy rates above budget.
The executive team has extensive experience in hotel operations thereby allowing individuals to invest with confidence. The company’s property management team skillfully develops strategies to gain maximum impact from the hotels’ sales and marketing efforts, capital improvements, and operating efficiencies. The team’s goal is to increase occupancy and/or average daily room rates, resulting in an increase in revenue and net operating income. The management team has historically achieved project level returns in excess of 20% in the hospitality sector.
RealShares (www.RealShares.com), a Varro Investment Company, offers accredited, individual investors the unique opportunity to participate in institutional-caliber hospitality real estate investment opportunities. The online investment platform is owned and operated as an affiliate of Urbana Varro, LLC, a national commercial real estate investment, development and management firm specializing in premium-brand hospitality properties.
Urbana Varro seeks to shape the outcome of its funds by improving property operations, ensuring that capital invested subsequent to a property’s acquisition is accretive to its performance and by optimizing the underlying capital structure of each property in its portfolio. To date, Urbana Varro’s principals throughout their careers have invested and/or managed in excess of $5 billion in commercial real estate projects and currently manage more than $120 million in commercial property. Follow the company on Facebook, Twitter, LinkedIn, YouTube or Vimeo.
As with any investment, past performance is not an indicator of future results. Certain factors, such as seasonality, operational disruptions due to property renovations, or a downturn in the economy, among others, could impact future performance. With the exception of historical information, the matters discussed in this news release include “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties, and the occurrence of future events, may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Current economic circumstances or an economic slowdown and the impact on the lodging industry, operating risks associated with the hotel business, relationships with our property managers, risks associated with our level of indebtedness and our ability to meet debt covenants in our debt agreements, our ability to complete acquisitions, dispositions and debt refinancing, the availability of capital, the impact on the travel industry from security precautions, and numerous other factors may affect future results, performance and achievements. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially. We undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.
*Source: STR, Inc. US hotel performance for year-end 2014 (January 22, 2015, HNN Newswire)