Mt. Royal Homes Moves to Begin Consolidation of Independent Inns

SAVANNAH, Ga. - Nov. 14, 2019 - PRLog -- Mt. Royal Homes, backed by Atlanta-based private equity, has entered the Georgia hospitality market in a bid to consolidate ownership in independently owned Inns and boutique hotels. The company believes there is significant upside for its investors in creating economies of scale for the properties and by doing simple revenue management- something that many small properties do not do well. Mt. Royal Homes will centralize all of the back-office operations for the properties into one central location, thereby cutting operational costs and raising profitability.

Mt. Royal Homes will be working with its select sale/leaseback partners to implement monetization of each hotel's real estate by conducting a sale and immediate lease back of the building. This will unlock substantial capital for the company's continued expansion. Investors have developed an appetite for larger portfolios of hotels to fast-track representation in the sector, and the Lease-back structure provides the necessary capital to acquire such hospitality properties. A sale-leaseback is a relatively new concept in hospitality market.  Most owners of inns and small hotels have likely never thought of separating their real estate and business operations, but using their specialized contacts; Mt. Royal Homes believes the idea has a big future. This strategy results in significant financial benefits for the company. During the course of the lease, the new owner has no management or maintenance responsibilities, Mt. Royal Homes pays for insurance, upkeep and property taxes — resulting in a true, triple-net leased, hands-off investment for the new owner.

The two principal disadvantages to owning real estate that is subject to debt are: (1) The debt shows up as a liability on the owner's balance sheet, and (2) financing is generally limited to a specified percentage of the fair market value. The sale-leaseback transaction therefore offers owners another financing alternative. Sale/Leasebacks typically provide a stable cash flow, act as a inflation hedge and have lower volatility. Sale-leasebacks are particularly desirable for hotel companies, like Mt. Royal Homes, intent on reducing balance sheet assets to improve financial and earnings ratios as well as return on capital. Unlike mortgage financing, where the amount financed is typically less than the full value of the property, a sale/leaseback affords financing equal to 100% of the market value. Because in most countries sale-leasebacks can be treated as "off-balance-sheet", financial ratios are improved. Return on assets and on invested capital increase, and widening the range of alternative vehicles available.

As Mt. Royal Homes shows the corporate world its particular brand of Southern hospitality in the hotel and corporate housing fields, investors' should greatly benefit from the steady returns without the hassle routinely involved in the ownership of these types of assets.