The Hotel Investor Playbook Ground-Up Boutique Hotel Development in San Francisco - High Risk, Higher Reward? | Mike Demson E22
Mar 18, 2025
Mike Demson, an experienced hotel investor, shares his journey into developing boutique hotels in San Francisco. He delves into finding undervalued properties and maximizing financial returns by increasing density and lowering construction costs. The conversation highlights the balance between innovative design and operational efficiency, focusing on creating memorable guest experiences. Mike also discusses his second project in Sonoma, including plans for expansion and a partnership with IHG's Vignette Collection, providing valuable insights for potential hotel developers.
AI Snips
Chapters
Transcript
Episode notes
Low Build Cost, High Exit Value
- Mike estimates construction at about $350/sq ft for the 16-room project and projects a post-stabilized value north of $11M.
- Low build cost plus high ARRs drives a large spread between project cost and exit value.
Finance With Interest Reserves
- Use construction loans with interest reserves to fund build and holding costs during the 18-month construction window.
- Pair lender financing with private equity to minimize initial equity outlay and preserve liquidity.
Revenue And Tight Expense Targets
- Mike projects 1.4M gross revenue with a 35–40% expense ratio, targeting ~900k NOI including $55k from retail.
- He expects new construction and in-house operations plus tech to drive lower ongoing expenses.