Sarah Dusek had built Under Canvas when a private equity buyer took a majority stake at a valuation north of $100 million. Michael Russell opens the episode by asking what they were actually buying. Her answer is two words: embedded EBITDA.

In this episode, Sarah explains how Under Canvas came to own both the real estate and the operating company as a single business with almost no bricks and mortar, and why that structure is unusual in hospitality. Michael presses her on whether glamping is destined to commoditize, given how little it takes to put tents on a field, and she argues the barrier to entry is lower than a comparable hotel while the operating complexity is about a hundred times harder. He also gets her to break down the economics of the conservation lodge business she runs at Few and Far, where a single project runs $20 million to $50 million, and she says she is underwriting to a 20 percent cash-on-cash target.

There is also the night a thunderstorm flattened her camp in Yellowstone while she was living on site with two small children, and what her team managed to do before eleven o'clock that same evening. She is candid about the credit card debt and the bankruptcy she was staring down at the time, and she gives a straight tactical answer on what to do on the days you want to quit. If you are trying to build something in hospitality that does not have a comp yet, and you want to hear what that actually costs, this is that conversation.

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Bruce and Emily Haupt run The Landgrove, a 16-room inn with a full-service restaurant and a 1,500-square-foot art barn, in a Vermont town of 180 people. They paid $1.8 million for it, and the down payment did not come out of savings. It came out of Emily's 401(k), rolled into the business through a provision in the tax code called ROBS, Rollover for Business Startups, which let them put $450,000 of retirement money to work without paying an early withdrawal penalty. The catch is that she had to quit a 16-year career at Shell before the money could move at all.

In this episode, Michael Russell walks through the capital stack piece by piece, all four layers of it: bank financing, development authority financing, the ROBS rollover, and a seller note. They get into what ROBS actually costs to set up and maintain, why it forces you into a C corporation, and why most of their business is owned by the 401(k) rather than by the two of them. They also cover what the spreadsheet missed, including a renovation Bruce says ran about four times what they planned for, and a staffing constraint that has both the Haupts and Michael housing their own employees.

If you have retirement money sitting in the market and a hospitality deal you cannot work out how to fund, this one is worth your time.

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Adam Walz and Micah Thomas are the co-founders of Comeback Hospitality, and they are roughly 30 days from opening The Wesley, a 1960s roadside motel in Page, Arizona they are converting into a 50-room boutique hotel. To buy it, they called 62 banks and got 61 no's. The 62nd said yes. As Micah puts it, financing a negative cash-flowing, unflagged hotel in a tertiary market is not something most lenders want anything to do with.

In this episode, Michael Russell walks them through how the deal actually came together. A property listed at $6 million stepped down to $3.3 million all cash, putting them in at roughly $67,000 a key against a market average Micah puts at $115,000. The capital stack: $4.7 million financed against about $6.7 million all in, $1.65 million raised from investors, $250,000 of their own money, roughly 80% loan-to-cost, and why they took the SBA 7(a) over the cheaper 504. They also get into what went sideways, including a $10,000 WiFi upgrade that became $50,000 before another $30,000 on top, and the largest investor walking away at the eleventh hour of a 90-day raise.

Micah also talks openly about living in room seven for the better half of six months while construction happened around him, and gives a straight answer on whether he would do it again. If you are underwriting your first commercial hospitality deal and you want to hear what the spreadsheet does not tell you, from two people who are still in the middle of it, this is that conversation.

If you found value in this episode, take 30 seconds to leave us a review. Tap into the show, scroll down to Ratings & Reviews, and drop a quick review. It helps more people find the podcast and keeps us bringing on great guests.

Connect with Michael on Instagram or LinkedIn.

Email Us at info@hotelinvestorplaybook.com

Visit the Hotel Investor Playbook Instagram

Invest with Malama Capital

Submit a deal