127 – Wholesaling Hotels In The Bay Area – Shannon Shackerley-Bennett

Synopsis

Shannon Shackerley-Bennett and North Star Hotel Development are a preconstruction development firm in Silicon Valley. Their focus is on select-service hotels. In this episode, you’ll learn how to wholesale hotels in the Bay Area and how to structure deals with the sellers to create massive profits for your investors.

Key points

The Beginning

Shannon came to America five years ago from Vancouver. Shortly after, she met someone who was focused on five-star luxury hotel construction. She did some business development for them and realized she loved the hospitality industry. Along the way, she met a developer who introduced her to the world of real estate. She started working with companies that needed her expertise in business development and operations. Thereafter she started combining the 2. She began building out hotels and developing real estate in the Silicon Valley. organizing companies that did that.

First Few Projects

Some of the first projects were just bare lands. She began talking to brands and director of development about their requirements for their expansion and what they wanted to see for the new hotels. With 4 kids and a really busy schedule, she drives around the city and saw a lot of vacant lots or empty buildings she thought should be torn down. She thought of ideas on what should be there instead.

In doing so she started to really hone down on thinking, is that what the directors want? Is this what the developers are looking for? Over time as she started to understand the requirements better, she was able to make better fits. The time came when she finally found one that they said: “yes, we think that’s a great fit” and that kind of launch the first project. It needed to be rezoned it needed to be entitled through the city to do that project and to change it to what it is today to what it can be in the future.

In doing so she started to really hone down on thinking, is that what the directors want? Is this what the developers are looking for? Over time as she started to understand the requirements better, she was able to make better fits.

Requirements

Any lot over a half-acre, generally a corner lot is better than an infill lot and something that is in an area that is downtown walkable close to some of their top local companies that’s desirable to be working at because that’s where the business travelers will be going to and something that is zoned to support a hotel. Very rarely do they go where people don’t want them. The city has got to be excited about the project, the community has to be excited about it, and the brand also needs to feel like it is going to be profitable for them. Those make good solid projects.

The Process

On Shannon’s first project she did not have much involvement in the rezoning of the project. Her role was more of an operational one in which she overlooked to make sure everything was being done on time and on budget. In this time, she underestimated the amount of time and effort it actually took. When she began doing the process herself, she realized how much time and effort it took and realize she was better off finding projects that do not require rezoning.
Timing for these processes can vary, entitlements normally take 12-18 months in Silicon Valley. Normally you want to go into a city where they are accepting new applications year-round where you know you will hear from them within 30 days.

In the process of doing her due diligence and going into contract, Shannon has a preferred vendor list she works with where she gets their estimates before going into contract with the property. Instead of giving the investors guesstimates she can provide them with the actual estimates and contracts with the vendors. Also, when starting these projects, you have to take into consideration the vendor’s capacity to actually take on one of these projects at the time that you need them too. You have to make sure that you fit in with their workload as well.

Currently, Shannon’s company is a preconstruction firm, they do not do buildouts, their strategy is to acquire land, get it in entitled, get the approvals, and market them to developers or investors that will build-out.

Finding The Buyer

Shannon’s firm hold discovery sessions every month for investors looking to invest with them, they also hold a list of over 200 prequalified buyers and by pre-qualified buyers, this is not in regards to funds as these buyers already proved they have the funds and have assets of their own but they have been prequalified in their requirements where Shannon’s firm would know if a particular property will fit their requirements. Where they now have a very targeted approach in the purchasing and marketing process.

Shannon and her firm are very involved in the industry. They attend a lot of networking events where they get to meet some of these buyers as well as sponsoring events. Most of the buyers already have a bunch of assets and properties and are looking to expand into Silicon Valley.

Associations & Conferences

• Hospitality and Design conference in Los Angeles – where you get into the constructions and design itself. In that room are all of the designers, vendors, and suppliers that support that industry.
• American Lodging and Investment Summit – This is a great place to go and make deals. You’ve got about 3,000 delegates in that room an enormous range of speakers. If you want to hear about the economy specific to this industry, that’s where you will hear people like Chuck Patel who owns most of Marriott’s.
• California hotel and lodging Association – At the capital, they have the legislative summits where you hear the issues that are important to the industry. You will also learn how politically this can affect the issues that affect the profit of the operations.

Tips On Wholesaling Hotels

Are you a new investor looking to get involved and get started? One of the most important things to do is to get a seasoned partner. Also, be willing to learn and follow their advice.

As a new investor, your funds would be very valuable as currently there are more projects than there are funds. Most of the projects start at about $250,000 where every project has its own LLC and investors purchase member shares where they can expect a return generally around 8%-25%

Generally, in Silicon Valley developers who are looking to buildout pay about $50,000-$90,000 per key. Using this as a rule of thumb if there is a site today for about 8 million with about 130-150 rooms, you will probably come out at about 13 million.

The Wrap-Up

Wholesaling hotels are like wholesaling houses but at a much bigger scale. The same principles usually apply. You have your buyer/investor list ready where you know what they need and are looking for. You have your exit strategies and buyers ready when you go into a contract. And with everything in place you execute your plan as scheduled. Of course, there are other challenges that arise with wholesaling hotels; but that is where a well-seasoned partner comes along handy.

References

More from our guest

• North Star Development website
• Shannon on LinkedIn
• You can reach Shannon at 646-430-3911