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
31
Oct
Japan-Fuyo Lease Exit: ¥10.17B Nishi-Shinjuku Deal Tests Hotel REIT Refinancing Thesis
October 31, 2025

Hotel investment surged 54% YoY in 2024, yet 84% of Asia-Pacific capital concentrated in five markets, while the Sotherly Hotels privatization at 152.7% premium and 9.3x EBITDA demonstrates value unlocking potential versus 6x public REIT multiples As of October 2025,...

Continue Reading
31
Oct
U.S. Hotel M&A Fragmentation: 30% Portfolio Volume Drop to €3.3B Signals Buyer Reset in H1 2025
October 31, 2025

Versus distressed REIT valuations A $48 billion CMBS maturity wave through 2026 forces borrowers to refinance 3-4.5% debt at 6.25-7% rates, compressing DSCR ratios and creating distressed secondary asset opportunities at 6-7% cap rates offering 150-200 basis point premiums over...

Continue Reading
30
Oct
South Korean Hotel Portfolio Exits: ₩875B Volume Signals 385bps Yield Reset in Q4 2025
October 30, 2025

Growth Hotel REIT privatizations commanded 152.7% premiums while public vehicles trade at 6x forward FFO, the most discounted property type in real estate, creating tactical entry points for allocators who can navigate vehicle arbitrage mechanics through 2026 South Korea's hotel...

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