Investment Payoff: Washington D.C. hospitality property

Key takeaways

  • Yieldstreet provided a $4.2 million mezzanine loan to a Washington, D.C. – based developer to convert a 99-room hotel into short-term rental studios.

  • Investors were offered a 10% target yield1 with an initial investment term of 36 months, and an option for one twelve-month extension.

  • Amidst the swift, successful completion of the renovation work required to finalize the conversion project, the investment was fully repaid two years after launch.

Yieldstreet’s investment in a Washington, DC, based real estate developer was fully repaid in March 2022, two years after the initial loan – and a year in advance of the initially expected maturity date. Investors earned a 10.5% IRR, in excess of the originally targeted 10% IRR. 

Investment thesis 

Yieldstreet closed a $4.2M mezzanine loan, secured by the borrower’s equity interests in a 99-key limited-service hotel located in a commercial zone in Downtown Washington DC. The goal was to support the developer’s conversion of the property into 99 furnished studio apartments, which would then be turned over – for a 15-year lease – to a leading short-term rental operator. While Washington, DC regulation restricts short-term rentals in residential zones, no such limitations exist for commercial districts. 

Investment outcome

The loan had an initial three-year term, with an additional twelve-month extension option. Yieldstreet’s investors payments were scheduled to accrue on their accounts and be paid-in-kind until conversion and lease payments had started.

Following the investment’s launch, the developer was able to keep the conversion project on track by successfully executing on each phase of its business plan, which led to an earlier exit, with returns outperforming the original IRR2.

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1. Target returns are offered as opinion and are not referenced to past performance. Target returns are not guaranteed and results may differ materially.
2 Past performance is not indicative of future results

Published:

04/29/2022

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