LEAVE US YOUR MESSAGE
contact us

Hi! Please leave us your message or call us at 510-858-1921

Thank you! Your submission has been received!

Oops! Something went wrong while submitting the form

9
May

🧭 Deal Lifecycle Methodology: From Brand Selection to Exit Waterfalls

Last Updated
I
May 9, 2025

Unlike other real estate sectors, hospitality investments require decisions that span multiple dimensions: real estate fundamentals, brand operations, regional macro trends, and public-private capital structure considerations. Bay Street Hospitality integrates proprietary scoring and benchmarking into each step of the deal lifecycle, ensuring that every variable is priced, scored, and stress-tested. This whitepaper walks through the seven stages of that lifecycle and the specific scoring logic used at each point.

The Seven Stages of Quantamental Deal Evaluation

Brand & Operator Selection

• Criteria: OpCo vs. PropCo, brand RevPAR performance, flag alignment

• Bay Score Link: Operator score, AHA premium from brand uplift

• BSHI Inputs: STR brand volatility, management fee compression

Feasibility Study & Market Positioning

• Metrics: Stabilized RevPAR vs. comp set, penetration ratios

• AHA Use: Compare to regional BSHI for alpha visibility

• Macro Overlay: FX, tourism elasticity, seasonality adjustment

Financial Modeling & Underwriting

• Tools: Bay Score triage, BAS range analysis

• Stress Testing: Exit delay impact via LSD

• Benchmark: Match IRR curve to BSHI trailing deciles

Debt & JV Structuring

• Inputs: DSCR, LTC, FX hedging, capital stack flags

• Scorecard Use: Sponsor co-invest, promote structure, risk share

• IC Memo Logic: Quant-justified preferred equity and intercreditor terms

Technical Diligence

• Focus: CapEx sufficiency, deferred maintenance, ADA/sharia overlays

• Score Interaction: Adjust LSD and Bay Score based on technical shortfall

• Stress Add-ons: Value leakage modeling via environmental/legal risk

Asset Management & Monitoring

• Dashboards: Forecast vs. actual NOI/RevPAR vs. BSHI

• Drift Alerts: AHA re-casting, BAS re-weighting, sponsor slippage alerts

• LSD Flagging: Exit planning triggers based on liquidity stress

Exit Strategy & Waterfall Design

• Variables: Buyer type sensitivity (strategic vs. financial), hold premium decay

• Quant Mapping: Exit IRR optimization vs. Bay Score under delayed exit

• Waterfall Sync: Promote clauses linked to scenario-tested score outputs

Use Cases & Applications

• Screen operator-brand pairings for uplift vs. volatility using BSHI metrics

• Present AHA and BAS-adjusted IRRs in IC memos alongside exit stress cases

• Use FX overlay tools to justify repatriation protections in cross-border JVs

• Build exit waterfalls that reflect scenario-modeled IRR dispersion and LSD drift

Quantamental Advantage

• Every lifecycle stage is tied to a transparent scoring engine

• Risks are benchmarked, not estimated

• Public-private bridge via REIT-adjusted volatility for underwriting clarity

• Operator and asset quality embedded in Bay Score framework

• LPs can view scorecards in real time, reducing blind spots and IC friction

LP Takeaways

• Every stage—LOI, feasibility, underwriting, structuring, exit—is scored and tracked

• AHA and BAS evolve with the deal, not just appear in a pitch

• Exit timing risk is modeled and tied to promote structure

• BSHI ties private underwriting to public comparables for auditability

Appendix: Bay Street Metrics

AHA = Return − Benchmark − Illiquidity Premium (1–7.5%)

BAS = AHA / volatility (public REIT proxy x leverage x dispersion)

LSD = (IRR_base − IRR_delayed) / IRR_base

Bay Score = Composite of AHA, BAS, LSD, Sponsor, Region, Structure

Benchmark Methodology Integration

• STR (TRI RevPAR Index)

• NCREIF Hotel Index (Time-Weighted Returns)

• Cambridge PE Hospitality Index

• FTSE Nareit Lodging (REITs)

• MSCI GPFI

• S&P Global Hotels (GICS Sector)

• Dynamic Illiquidity Premium (Hold Period, FX, Repatriation)

CoStar Methodology Integration & Forecast Notes

CoStar Modeled Flags, STR Sufficiency Checks, Oxford Economics Forecasts

Forecast Confidence = Low / Moderate / High → Impacts visual weight in Bay Score projections

Copyright Notice and Legal Disclaimer

The materials provided by Bay Street Hospitality Fund I GP LLC are for informational purposes only. They do not constitute investment advice. Reproduction without permission is prohibited.
© 2025 Bay Street Hospitality. All rights reserved.

...

Latest posts
15
Dec
Global Hotel REIT Refinancing Wave: Q4 2025 Signals 217bps Spread Compression Across Asia-Europe Portfolios
December 15, 2025

Budget, signaling operational resilience that public markets have failed to price Sovereign and institutional capital is reshaping hotel REIT capital structures through minority equity infusions paired with debt reduction mandates, exemplified by GIC's April 2025 SAMHI Hotels joint venture, offering...

Continue Reading
15
Dec
Park Hotels' $198M Non-Core Exit: Q1 2026 Disposition Tests 245bps Portfolio Optimization Premium
December 15, 2025

Growth in current market conditions The 245bps spread between REIT disposal economics (6.5% cap) and private market implied cap rates (7.7%) reveals a structural arbitrage opportunity for allocators focused on event-driven strategies in Q1 2026 As of Q1 2026, Park...

Continue Reading
12
Dec
India Hotel ADR Growth: 10-12% Q4 2025 Rate Power Signals 525bps Operating Leverage Premium Over Gateway Markets
December 12, 2025

Points annually Cross-border hotel M&A accelerated 54% year-over-year through October 2025, with transaction-level valuations like Le Pavillon's 2.6% cap rate (27.2x Hotel EBITDA) revealing 300-525bps premiums that sophisticated allocators capture through privatization strategies bypassing public market structural drag As of...

Continue Reading

Unlock the Playbook

Download the Quantamental Approach to Investor Protection, Alignment & Alpha Creation Playbook
Thank you!
Oops! Something went wrong while submitting the form.
Are you an allocator or reporter exploring deal structuring in hospitality?
Request a 30-minute strategy briefing
Get in touch