A THIRD-PARTY manager of extended-stay hotels has decided to put more skin in the game.
Sandpiper Cos. of Richmond, Virginia, has been developing and operating extended-stay hotels for nearly 10 years. In October, it formed Sandpiper Lodging Trust, a privately held lodging REIT. To kick start the company, Sandpiper Lodging Trust acquired nine extended-stay hotels from Sandpiper LLC, a subsidiary of Sandpiper Cos.
Leading the organizations is Sandpiper Cos. founder P. Carter Rise, an apartment developer who got involved in the extended-stay lodging sector when he realized there was a “large, untapped market composed of people who needed a place to stay for a week to six months or more,” according to Sandpiper’s website.
Sandpiper Cos. is a private equity firm that built its first extended-stay hotel in 2009, a WoodSpring Suites in Chesapeake, Virginia. In 2012, it formed Sandpiper Hospitality, a management company. Jim Darter is president and CEO of the enterprise.
The company shares its history on its website: “We created Sandpiper Hospitality with the express goal of being the absolute best manager of midscale and economy extended stay hotels. Starting with four properties, we have methodically built the management capabilities we envisioned … We are poised for continued growth and expansion of our own brand in the broader hospitality segments.” Overall, Sandpiper Hospitality manages 34 extended-stay properties.
Sandpiper LLC’s portfolio consists of WoodSpring Suites and Extended Stay America hotels. Choice Hotels International owns the WoodSpring Hotels brand. ESH Hospitality is parent and franchiser of Extended Stay America.
Sandpiper Lodging Trust (SLT) now owns nine of the WoodSpring Suites hotels. The REIT was capitalized through the roll-over by a majority of the investors in the hotels of their ownership interests in exchange for equity in SLT, the completion of a new $75 million credit facility, and the private placement of approximately $12 million of new Class A common shares in SLT.
“Our predecessor funds delivered outstanding returns to our investment partners, and it was time to recapitalize those funds into a vehicle that we could build on for the future,” Rise said in a statement. “We are extremely happy that our current investors, as well as our new investors, see the opportunity to build a meaningful portfolio of extended-stay hotels.”
Indeed, the extended-stay lodging sector in the U.S. may produce some meaningful returns on investment. Mark Skinner of The Highland Group in October said the sector is “posting some of the largest gains in supply demand and room-revenue growth that has ever occurred.”
The Highland Group has tracked the U.S. extended-stay business for 20 years. “Revenues are growing at almost double the 6.1 percent increase in overall U.S. hotel revenues reported by STR,” said The Highland Group in its mid-year extended-stay report released in August. From January through June, the U.S. extended-stay industry generated $4 billion in room revenue, an 11.8 percent increase over the same period in 2017.
The economy segment’s average occupancy is 78 percent. WoodSpring’s was 79.4 percent. Extended Stay America’s average occupancy in 2017 was 80.1 percent.
Steve Miller, managing director of real estate and development at Extended Stay America, has said average length of stay for the brand is 25 to 30 days. More than half of its guests are “people whose lives are in transition.” Many people in search of long-term lodging are forced to room in transient hotels, Miller said. “If there is not an extended-stay hotel within a five-mile radius, as soon as you open one, it fills up.”
In related news, Singerman Real Estate LLC of Chicago on Nov. 26 named Sandpiper Hospitality manager of its 14 newly acquired Extended Stay America hotels. Singerman Real Estate is a real estate investment firm. It has franchised the assets from Extended Stay Hospitality, the parent of Extended Stay America. Singerman also has agreed to build or convert seven more Extended Stay America hotels.