GUESTHOUSE

Palm Springs Campus Development

Strategic Expansion of Distributed Luxury Hospitality Platform

Following Lake Tahoe's development (opening Late Q4 2025, bookings now live, Forbes-featured), Palm Springs represents the strategic second campus in our distributed luxury hospitality platform. Analysis confirms severe supply constraints (low inventory tier) against 3.5M annual visitors, positioning for premium pricing power. The existing $368K annual rental income eliminates traditional development risk during conversion, while conservative modeling shows 13.8% returns with upside to 22%+.

Comparative Market Analysis

Market Premium Group Supply* Market Size Peak Annual AADR** Guesthouse Status
Lake Tahoe/Truckee Medium inventory 5.2M visitors/year $2,500-4,000 Campus #1 Opening Q4 2025
Palm Springs Low inventory 3.5M visitors/year $2,800-5,000 Campus #2 Target
Santa Barbara Low inventory 7M visitors/year $2,400-3,800 Future Pipeline
Napa Valley Low inventory 3.8M visitors/year $2,600-4,200 Future Pipeline

*Premium group properties defined as 10+ bedroom luxury accommodations
**Aggregated Average Daily Rate (AADR) = 4 × ADR for prevailing market
Source: Market research of available inventory on luxury platforms, Q4 2024

Lake Tahoe Campus: Constructed Model

$2,887
Prevailing AADR
44.8%
Year 5 NOI Target
26%
Break-Even Occupancy
Live
Booking Status

Lake Tahoe Validation Points

  • Opening Late Q4 2025 with bookings now live
  • Forbes feature coverage establishing brand credibility
  • Bjarke Ingels Group design partnership for architectural excellence
  • Target segments: 40% corporate retreats, 35% luxury families, 25% celebrations
  • Strong early interest: 30% of inquiries from Southern California market
  • Development systems and vendor relationships ready to replicate

Investment Analysis

Base Case Assumptions - Palm Springs Campus

55%
Year 1 Occupancy
25%
NOI Margin
13.8%
NOI Yield on Capital
4.8%
Cash-on-Cash Return

Assumptions account for Palm Springs seasonality and Year 1 operating learning curve

Sensitivity Analysis - NOI Yield on $4.0M Capital Investment

Scenario Occupancy Revenue NOI Margin NOI Yield on Capital
Conservative 55% $2.2M 25% $550K 13.8%
Base Case 60% $2.4M 28% $672K 16.8%
Target 65% $2.6M 30% $780K 19.5%
Stretch 70% $2.8M 32% $896K 22.4%

Returns exceed institutional benchmarks across all scenarios

Leverage Advantage

56% leverage at 5% seller financing enhances returns

$4.0M
Capital Invested
$5.94M
Asset Controlled*
$259K
Annual Debt Service
*Asset Controlled: The total property value you control through your investment. With $4.0M capital invested and $1.94M seller financing, you control a $5.94M asset (purchase price of $3.44M + renovations of $2.5M). This leverage amplifies returns as you earn NOI on the full $5.94M asset value while investing only $4.0M of capital.

6-Month Approval Period Income Bridge

$30.7K
Monthly Rent Roll
$184K
6-Month Income
111%
Debt Coverage
$14K
Cash Surplus

Approval Period Cash Flow Mitigation

Month Rental Income Operating Costs Debt Service Net Cash Flow Cumulative Savings
Month 1 $30,700 ($6,755) ($21,583) $2,362 $2,362
Month 2 $30,700 ($6,755) ($21,583) $2,362 $4,724
Month 3 $30,700 ($6,755) ($21,583) $2,362 $7,086
Month 4 $30,700 ($6,755) ($21,583) $2,362 $9,448
Month 5 $30,700 ($6,755) ($21,583) $2,362 $11,810
Month 6 $30,700 ($6,755) ($21,583) $2,362 $14,172

Total 6-month income of $184,200 covers 100% of debt service ($129,498) and operating expenses ($40,530)
Plus generates $14,172 surplus for working capital

Comparative Advantage: Most hospitality developments require $130,000+ in carrying costs during a 6-month approval period (debt service alone). This property not only eliminates that burden but generates a $14,172 surplus. This is equivalent to receiving a 0% interest construction loan for the approval period - a $144,000 advantage versus a typical vacant property acquisition requiring immediate renovation.

Capital Structure & Investment Terms

Target Capital Structure

Listed Asking Price $4,300,000
Negotiation Target (20% below asking) $3,440,000
Down Payment (44% of purchase) $1,500,000
Seller Financing (56% LTV @ 5% interest) $1,940,000
Renovation Budget (premium finishes & amenities) $2,500,000
Total Capital Investment $4,000,000

Terms subject to ongoing negotiation. Seller financing structure provides favorable cost of capital
compared to traditional hospitality lending at 7-9% rates.

Platform Synergies & Campus Portfolio

Platform Synergies: Lake Tahoe + Palm Springs

Metric Lake Tahoe Campus Palm Springs Campus Portfolio Benefit
Peak Season Summer/Winter Fall/Spring 95% year-round occupancy potential
Client Base NorCal Tech/Finance SoCal Media/Entertainment Doubles addressable market
Member Acquisition New market development Established database Reduced CAC via cross-marketing
Management Systems Standalone operations Shared platform Economies of scale achieved

Platform efficiencies projected based on shared infrastructure and systems

10-Campus Portfolio Vision

$69.6M
Portfolio Value
19%
Target IRR
99
Total Keys
$15B
Market Size

Investment Summary

Palm Springs Campus #2 advances our distributed luxury hospitality platform with
de-risked execution through existing cash flow. Conservative modeling at 55% occupancy
and 25% NOI margins delivers 13.8% returns - exceeding institutional benchmarks
with upside potential to 22%+ as operations stabilize and occupancy improves.

Key Risk Mitigation: The property generates positive cash flow from Day 1,
covering 111% of debt service through existing operations while Lake Tahoe's
development blueprint provides the operational playbook for premium positioning.