Sometimes, we can be so eager to update you on exciting developments that we forget to step back and examine the basics.
One fundamental of this offering is that we’re already paying an 8% preferred annual return, plus growth. We repeat it a lot—it’s something we’re proud of—but we also get asked a lot, “What is a preferred return?”
First, the technical side. When you invest in our 7th offering, American Hospitality Properties REIT, Inc., you enter into a limited partnership with us (we are the general partners, and you, our investors, are our limited partners). The preferred return is a provision we planned and wrote into this agreement. It dictates that limited partners are entitled to an 8% annual return on profits achieved before the general partners may take any fees or profits. That means our investors, in the form of monthly distributions, earn 100% of returns up until we achieve an 8% annualized return. After that threshold is met, though, our investors will also earn 80% of returns until we hit 12%, and then 60% past over 12%. This is called a “waterfall” fee structure, which provides mutually beneficial incentives, and really pushes us to perform.
Now, in English. A preferred return means you get paid before we do. We get nothing until you achieve an 8% return each year (and 80% of profits from 8% until we hit 12%, and 60% afterwards). To date (and this is our seventh fund) we have paid our investors in the form of monthly distributions. We opted to pay these monthly instead of quarterly because so many of our investors pay their bills every month.
In addition, investors will share in any “growth” achieved on our properties when we sell them. So if all goes well and our hands-on leadership increases the value of our hotels (which we would continue to buy at COVID-reduced pricing), we’ll be selling them within 3–5 years at a profit, which we will share with you.
It’s easy to get lost in the jargon of the investing world, but this offering is simple. Our strategy is “buy low, sell high, and profit along the way.” With one investment, you could receive a piece of the pie when we sell, while earning monthly income along the way.
To learn more about investing in our Business Select Hotel REIT, or to increase your current investment, please visit our offering page and read through our SEC qualified Offering Circular.