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LuxUrban Hotels (NASDAQ: LUXH) is an innovative company that acquires long-term operating rights for hotels facing looming debt maturities in major destination cities. The company’s unique business model centers around Master Lease Agreements, which allow the company to secure long-term operating cash flows while providing hotel owners and landlords with fixed, stable, and financeable cash flow. As of June 30, 2024, the company operates 13 hotels across four cities, employing approximately 450 people.
The company’s portfolio primarily consists of 3-star to 4-star Select Service hotels, with a growing focus on larger “marquee” properties in the 3.5-star to 4.5-star range. Hotels are eager to partner with LuxUrban because they recognize a generational opportunity to leverage the business’s current and future cash flow potential. The partnership enables them to effectively execute rapid growth plans and capitalize on significant future upside, including optimization, ADR growth, and additional revenue streams.
LuxUrban currently operates 13 hotels in four of the most popular tourist destinations in the United States, including:
9 properties / 1,075 units
1 property / 68 units
1 property / 68 units
1 property / 60 units
Weighted average lease remaining: 14.5 years (19.5 years including extension options)
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Since its inception, LuxUrban has experienced rapid growth and evolution. The company completed its Initial Public Offering in 2022, changing its name from CorpHousing Group to LuxUrban Hotels and exiting its legacy apartment rental business. In 2023, LuxUrban closed a public offering of 13.00% Series A Preferred Stock, eliminated all Senior Debt, and extinguished $87.5 million in future revenue share payment obligations. The company’s financial performance has been strong, with Net Rental Revenue increasing by 159% from 2022 to 2023, reaching $113.4 million.
LuxUrban is strategically positioned to capitalize on the current market opportunities in the commercial real estate sector. With approximately $25 billion of hotel CMBS loans coming due in 2024, the company’s Triple Net Lease and Corporate Guarantee model provides a solution for property owners facing refinancing challenges in the current risk-averse environment.
Lease hotel using refundable security deposit or Letter of Credit
Maximize occupancy rates and increase cash flow
Streamline operations
LuxUrban’s growth strategy involves identifying and capitalizing on low-cost, long-term triple net lease opportunities. The company targets turnkey hotel properties that are undervalued due to dislocated capital structures but have a track record of relative operational success. LuxUrban aims to improve Total Revenue per Available Room (TRevPAR), drive margin expansion, and increase cash flow.
LuxUrban believes that Total RevPAR (or “TRevPAR”) is the most representative way of presenting its results. TRevPAR is defined as the total revenue received by the company. This includes:
The examples on the following graph reflect a 4-star and 3-star property in New York City. The amounts compare how LuxUrban calculates TRevPAR (all in and inclusive of all commissions, taxes, labor, utilities and fees).
These are calculated on a per room basis, each room, every night. In the event of a period of reduced rates, the company would be able to drive down its breakeven point with reduced staffing, reduced utility usage, etc.
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In 2024, LuxUrban (NASDAQ: LUXH) has focused on stabilizing operations, refining its strategic direction, and aligning the business to market opportunities that promise long-term shareholder value. The company has added significant industry experience to the executive team and Board of Directors, who have already began initiating measures to improve working capital resources and cash flow profiles. LuxUrban also enhanced its balance sheet in 2024 by removing underperforming properties from its portfolio, allowing the company to focus on driving organic growth in more lucrative locations.
Through its Master Lease Agreement approach, LuxUrban secures stable cash flows and optimizes operational efficiencies, leading to significant returns on equity. With a current portfolio of 13 hotels across key cities and a focused growth strategy, the company has demonstrated impressive performance and adaptability to current market trends. The combined factors put LuxUrban on track to become a big name in running select service and marquee hotels in some of the U.S.’s most popular destinations – and investors may want to make their reservations before this opportunity is fully booked.
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