The hotel industry is complemented by a host of great brands and investment options. At Midas, our experienced team recognizes that you have many options for your investment dollars. Because we want repeat investors, our growth strategy caters to those who appreciate aggressive, yet selective, investment criteria. Midas works closely with you to create an investment that will meet your requirements for both a tax and return perspective.
Our investments gravitate toward what Midas executives would expect for returns on their dollars. We make every attempt to locate projects with either “A” brands or “A” locations. We also think outside the box and look at “B” brands if they have “A” locations.
We are debt service coverage driven in selecting hotels. We like our projects at stabilization to cover 1.4 to 1.8 times the projected NOI. If the debt service can support a shorter amortization period without reducing coverage below 1.4, we tend to support that business model. Comfortable debt service coverage allows a cushion by which dividends can be free flowing at year-end. It also lends support for capital replacements as needed. Thus, all Midas projects have the potential for high return multiples.
We generally look for those projects that have projected Internal Rates of Return (IRRs) ranging from 20% to 40%. However, we are more likely to look at the cash-on-cash returns annually. Because IRRs are heavily influenced by a project’s reversion upon sale, we are more focused on the annual “cash divided” for the investment dollars based on the project’s performance. We would be disappointed not to provide an annual cash-on-cash return in the teens for the third-party investors. Due to our experience with cost segregation, some investors enjoy these returns on a tax-deferred basis. In addition, depending on your specific tax situation, we will make every attempt to meet a tax advantaged return for each investor.