On behalf of Midas O'Fallon HIEX LLC and Midas O'Fallon SS LLC, CBRE Hotels presents the opportunity to acquire the fee simple interest in two exceptional IHG-branded properties located just 30 minutes west of downtown St. Louis in O’Fallon, MO.
Strategically located next door to one another at Highway K off Interstate 64, the two hotels are proximate to high-trafficked retail centers, major industrial sites including the 4,000+ employee GM Assembly Plant, and regional HQs of leading financial institutions such as Citi and Mastercard. The hotels performed extremely emerging from the COVID 19 pandemic and have strong in-place cashflows, which will create favorable financing options for potential investors. Upon acquisition, new ownership is expected to receive long-term franchise term upon completion of the change of ownership PIPs. While the hotels are able to be retain their existing brands, the properties are being offered unbranded, which creates branding and alternative use optionality for prospective buyers. Available unencumbered of management, the two hotels offer investors an exceptional opportunity to acquire two well performing hotels in one of top growing communities in metro St. Louis.
Investment Highlights
Strong In-Place Performance
The strength of the western St Louis suburbs and specifically the I-64 corridor has enabled both of the subject properties to ramp quickly coming out of the pandemic. The diversity of the targeted sources of demand, which includes transient and extended-stay, have helped create a strong balance of weekday and weekend demand for both hotels. In 2022, the portfolio surpassed its pre-covid RevPAR of $71, ending 2022 at $75 and is projecting to reach $84 in 2023, driven by additional occupancy and sustained rate growth. Despite inflationary pressures and labor challenges experienced across the industry, the properties continue to drive impressive margins, providing strong in-place cash flow close to their pre- covid bottom line highs. In 2022, the portfolio had over $1.6M of NOI and is currently pacing for just under $2M by 2023 year-end.
Brand and Management Optionality
The portfolio’s offering unencumbered by management coupled with their franchise license terms expiring in late 2023, presents compelling opportunities to new ownership to implement their own marketing strategies to improve market RevPAR penetration and drive NOI levels while also potentially branding the hotels with different brands or converting to an alternative use such as apartments. Regardless, of the path chosen, the properties offering a compelling opportunity to enter the strong O’Fallon market, which continues to see strong economic development.
Economies of Scale
Given their side-by-side location, opportunity exists to drive additional NOI by sharing more employees in multiple departments. Currently, the only existing shared employees between the Holiday Inn Express & Suites and the Staybridge Suites are the sales positions. If purchased as a portfolio, the clustering of employee operations including GM’s and Property Operations and Maintenance, among other areas, could provide economies of scale and increase operating efficiencies, ultimately driving NOI.
Attractive Basis
The anticipated all-in basis, inclusive of PIP estimates, will be well below replacement cost, which should higher overall investment returns for new ownership.
Holiday Inn Express & Suites - St. Louis West - O’Fallon
The 122-room Holiday Inn Express & Suites was originally developed in 2005 and is located next-door to the Staybridge Suites. The Holiday Inn Express & Suites benefits from its strategic, highly-visible location on Interstate 64, providing direct access to major demand drivers in O’Fallon, neighboring suburbs, and downtown St. Louis. The property’s location at the interchange of Interstate 64 and Hwy K provides close proximity to some of the hotel’s major demand, including Progress West Hospital and Citi’s regional headquarters, as well as a multitude of restaurants for guests such as Cracker Barrel, Timber Creek Grill, Starbucks and other popular fast casual dining options. Other major demand drivers for the hotel include Mastercard’s regional headquarters (3.0 mi.), the 4,000+ GM assembly plant in Wentzville (10 mi.), and Global Medical Response (GMR) - of which the Holiday Inn Express & Suites is the exclusive hotel. Also south of the hotel on Interstate 64 stretching from the Missouri River into Chesterfield is a great deal of leisure-centric demand generators including the St. Louis Premium Outlets, the Chesterfield Valley Athletic Complex, and Chesterfield Mall. The hotel’s healthy room mix of 65 double queen beds and 57 king beds allows it to maximize this share of leisure demand.
Staybridge Suites - St. Louis West - O’Fallon
The three-story, 97-room Staybridge Suites is located next-door to the Holiday Inn Express & Suites and is one of just two extended-stay hotels in O’Fallon. Further, it is the western-most premium branded extended-stay hotel in the St. Louis metropolitan area - and the last one stretching as far west on Interstate 70 to Columbia, MO (95 mi.) and as far north on Interstate 64 to Burlington, IA (185 mi.). This gives it a strategic advantage in capturing business from long-term corporate and project demand northwest of O’Fallon - such as the massive GM assembly plant 10 miles northwest on Interstate 64, the hotel’s largest corporate account. Other major demand drivers include the nearby Citi and Mastercard regional headquarters, Progress West Hospital and other healthcarerelated demand, temporary housing, and economic development projects. The hotel is also proximate to a variety of dining options at the same interchange and major retail centers including the St. Louis Premium Outlets just south on Interstate 64.
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