- Guesthouse Insights

Executive Summary: A Downside-Protected Investment

$3.875M

Purchase Price

$4.0M

Appraised Value

$7.5M

Prospective Value

$30K/mo

Day-One Cash Flow

Colliers International appraised the property at $4.0M as-is (December 2025) and $7.5M upon conversion (January 2027). The conservative Phase 1 case shows value creation through conventional improvements alone.

$350K

Minimum Investment

Preferred Return

Pari Passu

Participation After Pref

$350,000 Investment Returns

Phase 1 Exit — Month 12

1.22x

Multiple

22%

IRR

Investment$350,000
Equity Share (19.8%)$397,000
9% Preferred (12 mo)$31,500
Total Return$428,500

Phase 2 Exit — Month 24

3.07x

Multiple

75%

IRR

Investment$350,000
Equity Share (19.8%)$1,013,000
9% Preferred (24 mo)$63,000
Total Return$1,076,000

*IRRs based on current Colliers appraisal values and prior to Phase 2 construction capital deployment.

The Property

A 0.75-acre compound in central Palm Springs featuring a pool courtyard, mature palm trees, commercial kitchen infrastructure, and 17 units configured as rental apartments.

Campus Overview

Value Creation: Three Phases

At Purchase

As-Is Apartment Complex

$4.0M

Appraised value
December 18, 2025

Colliers Appraisal

Phase 1 — Month 12

Improved Multifamily + Early Amenities

$4.4M

Unit improvements, Day Passes, Bakery

+13% Value Growth

Conservative Estimate

Phase 2 — Month 24

Guesthouse Hotel Stabilized

$7.5M

18-room limited-service lodging

+94% Value Growth

Colliers Appraisal

The Conservative Case (Phase 1): Even without full Guesthouse conversion, the property reaches $4.4M through conventional improvements. Phase 2 requires belief in Guesthouse—Phase 1 does not.

Property Configuration: Before & After

Existing: SFR, Reception, 4 Units, Clubhouse, Pool, Two 6-unit buildings
Total: 16 rentals + 1 SFR = $30K/month

Phase 1: Improve 12 units, Day Passes, Bakery
Phase 2: Full Guesthouse conversion

Deal Structure & Capital Requirements

Component	Amount	Notes
Acquisition
Contract Purchase Price	$3,875,000	3% below appraised value ($4.0M)
Down Payment / Equity	$1,500,000	38.7% of purchase
Seller Financing	$2,375,000	5% interest (vs. 9%+ market)
Construction & Design
Construction	$2,500,000	Full conversion buildout
Design Fees (15%)	$375,000	Architecture, engineering, permits
Subtotal Construction & Design	$2,875,000
Total Capital Required	$4,375,000

Sponsor / GM Economics

Asset Management Fee 4% of Net Revenue Promote Threshold 10% Value Improvement

Promote Structure 20% Above Threshold Catch-Up After 9% Pref to LPs

Phase 1 Exit Analysis (Month 12)

Metric	At Purchase	Phase 1	Change
Monthly Revenue	$30,000	$52,200	+74%
Annual NOI (35%)	$126,000	$219,240	+74%
Property Value	$4,000,000	$4,385,000	+10%
Investor Equity	$1,625,000	$2,010,000	+24%

Blended 5.0% cap reflects mix of rental (5.5-6.0%) and hospitality revenue (4.0-5.0%). As-is $4.0M per Colliers appraisal.

Phase 2 Exit Analysis (Month 24)

Metric	Phase 1	Phase 2	Change
Monthly Revenue	$52,200	$120,000	+130%
Annual NOI (35%)	$219,240	$504,000	+130%
Property Value	$4,385,000	$7,500,000	+71%
Investor Equity	$2,010,000	$5,125,000	+155%

Phase 2 assumes 18-room boutique hotel at $300 ADR, 65% occupancy (~$105K/month rooms revenue) plus Bakery/Day Passes (~$15K/month). Prospective value of $7.5M per Colliers appraisal dated January 1, 2027.

Key Dates

Date	Milestone
January 29, 2026	$25,000 went hard (non-refundable)
February 2, 2026	Additional $75,000 due and goes hard
March 2, 2026	Buyer Contingency Period ends
April 15, 2026	Close of Escrow
June 2026	4-unit conversion begins
September 2026	Day Pass memberships begin
April 2027	Phase 1 decision point

Third-Party Validation

Colliers International Valuation & Advisory Services (File #LAS250404, January 20, 2026) appraised the property using USPAP Standards Rule 2-2(a). As-Is Market Value: $4,000,000 (December 18, 2025). Prospective Value Upon Completion/Stabilization: $7,500,000 (January 1, 2027).