Bay Street Hospitality solves this by integrating a Dynamic Negotiation Playbook into every investment—linking legal and financial terms directly to risk-adjusted scores such as:
- AHA (Adjusted Hospitality Alpha)
- BAS (Bay Adjusted Sharpe)
- Bay Score
- BMRI (Bay Macro Risk Index)
- LSD (Liquidity Stress Delta)

This whitepaper explains how Bay Street uses its quantamental system not only for underwriting—but to structure smarter term sheets that flex based on actual investment conditions.

‍

The Problem with “Standard” Terms

• Promote structures ignore exit delay risk

• Equity waterfalls don’t reflect regional FX drag

• Indemnities ignore sponsor co-investment levels

• Guarantees don’t adjust for country-specific rule of law

In hospitality, where contracts span multiple jurisdictions and operators, a static term sheet equals mispriced risk.

‍

A New Model: Dynamic Clause Mapping

Bay Street maps core risk signals to specific negotiation clauses.

Metric | What It Triggers

• AHA | Adjusts preferred return and GP promote thresholds

• BAS | Triggers enhanced downside protection at low Sharpe

• Bay Score | Controls inclusion of ESG reps, co-investment minimums

• BMRI | Dictates FX escrow, local entity clauses

• LSD | Impacts exit timing provisions, break fees

For each clause, we define:
- Ideal Term
- Fallback Position
- Dealbreaker Threshold

This model is integrated into the Bay Street Terminal and automatically generates investor protection profiles.

‍

Example Mapping: Exit & Liquidity Provisions

Metric | Ideal Term | Fallback | Dealbreaker

• LSD < 1% | No penalty for GP exit after Yr 3 | 6-month rolling window | Exit only at discretion of sponsor

• LSD > 3% | GP must hold for 5 years minimum | 2-year lock w/ break fee | No lock-up; GP can exit at will

If LSD volatility is high, the system automatically upgrades protective terms.

‍

Example Mapping: Promote Structure

• AHA > 5% | Promote above 12% IRR w/ catch-up | Promote above 10% IRR | Promote begins at 8% with no hurdle

• AHA < 2% | Waterfall kicks in only post-15% IRR | Promote deferred post-exit | Promote tied to gross revenue

‍

Example Mapping: FX and Legal Structuring

• BMRI > 0.2 | FX hedge + USD-denominated waterfall | Local currency w/ repatriation buffer | No FX protection; full local-currency return

• BMRI < 0.05 | No hedge needed | Optional local buffer | -

FX-sensitive terms are applied based on the BMRI score for that jurisdiction.

‍

System Integration: AI-Powered Term Sheet Builder

• Dynamic Clause Library: 40+ customizable clauses

• Live Inputs: Bay Score, AHA, LSD, BMRI auto-sync with financial model

• Risk Profile Modes: Conservative, Balanced, Aggressive

With one click, the system generates an LP protection playbook matching the score profile of each deal.

‍

Strategic Implications for LPs

• Faster Negotiations: Pre-baked clause logic aligns with actual risks

• Smarter Trade-Offs: “Fallback” clauses allow room to close deals without overexposing capital

• Quantifiable Protection: Legal protections are backed by score-based thresholds

• Better GP Alignment: High-risk sponsors must co-invest more and accept stricter waterfalls

‍

Conclusion

This is not just a legal tool—it’s a financially integrated negotiation system. Bay Street’s Dynamic Negotiation Playbook empowers investors to enforce discipline, adjust for cross-border complexity, and ensure that every deal is quantifiably protected—from Portugal to Singapore.

As hotel markets evolve, capital must come with terms that evolve too. This system ensures it.

‍