TFG Asset Management has recently published another hotel asset management guide article on Hospitality Net. Having witnessed an influx of newly signed deals and developments, we are motivated to share our summary of the building acquisition process and strategies in place at our firm.
Initially, the buyer is encouraged to recruit a professional asset management firm to conduct a re-valuation of the existing building or land valuation.
After the Asset Management firm has been appointed, the first task that is required of them is to set up a rigid grid of criteria to evaluate each potential project based on the buyer’s objectives and interests. The criteria must weigh the financial variables (i.e cost of land, project profit, potential appreciation in asset value etc.), commercial factors (i.e location, property type, current management style etc.), and building facilities (facilities of the hotels, configuration, concept, insurance, warranty etc.).
As part of the due diligence, the Hotel Asset Manager (HAM) should be able to provide an in-depth market analysis. This covers the current and future supply, changes in demand and any other trends which may have a considerable effect on the land and/or the property. The clearer the information presented during the due diligence, the easier it is for the HAM to highlight critical elements which affect the purchase of the asset.
Projects of interest will be inspected by an appointed building surveyor by the HAM. The appointed surveyor will certify if the building is maintained properly and that there are no potential hidden flaws that could lead into major losses in the future. The technical due diligence tends to identify all elements, not all of which are relevant.
The HAM shall evaluate the report and highlight the elements that will affect the operations of the hotel. The HAM will have to evaluate and incorporate such insights into their Capital Expenditure model. Whether or not this will affect the final purchase price, will be subject to the owner’s decision.
As hotel asset managers, we find it imperative to be involved in the preliminary stages of the project to help advise our owners on the potential returns and to ensure alignment with their objectives.
For in-depth article, please click on Hospitality Net to access our article.
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