- Vertically-integrated hotel company Life House announced it has raised $100 million in equity commitments from Blue Flag Partners.
Life House — a vertically-integrated hotel company with a growing collection of lifestyle boutique hotels — announced it secured $100 million in equity commitments (approximately $250-300M in total asset value) from Blue Flag Partners.
With this round of funding, Life House is going to fund its continued and rapid expansion through the acquisition of seven to ten additional hotels.
This announcement comes on the heels of Life House taking over the operation of The Roberts Collection — which is a historic 58-room hotel in Nantucket, MA (acquired by Blue Flag in April) And Life House is operating The Roberts Collection as part of its white-label and tech-enabled management platform. And Life House will begin restoration of the hotel in fall 2019 thus transforming the property into a locally-rooted hotel by Life House.
“Since day 1 we have been acutely focused on driving value to our hotel owners through technology advantages and contextually responsive design and we’re thrilled to see that Blue Flag has recognized this value and formalized a long term partnership with us,” said Rami Zeidan — the CEO and founder of Life House. “To date, we have only raised $10 million in venture capital and this partnership further demonstrates our ability to scale a lifestyle hotel brand and management company in a capital-efficient manner to maximize returns for our venture capital investors.”
Life House has leveraged its venture backing from investors such as Global Founders Capital, Comcast Ventures, and Trinity Ventures to develop proprietary technology that drives incremental revenue and automates operational efficiencies thus yielding a 30-50% higher return on hotel investments for its real estate partners than traditional management companies.
And through the repositioning of the Nantucket project alone, Life House is projected to increase NOI by more than100% per year, translating to a $15 million increase in the value of the property and catalyzing Blue Flag’s interest in a partnership to grow a larger scale platform.
“We selected Life House after a competitive process, and we’ve quickly seen the massive value they’re able to create. Since we closed on the acquisition this past spring and in advance to repositioning the asset, they are already driving approximate 40% higher total revenue with nearly 80% direct web bookings,” added Terry Sanford — the co-founder of Blue Flag. “We’ve been very impressed with Rami and the Life House team and we’re actively looking to build our portfolio with them around the country.”
In the first year of operation, Life House has signed over 500 rooms across nearly 10 projects and spending less than $5 million of venture capital and positioning the company to raise a Series B this summer. And by 2020, Life House will have more than 20 hotels open or under construction across the United States in markets including Nantucket, Brooklyn, Denver, and Lake Tahoe.
“As we did with our Nantucket project, this investment platform allows us to continue to couple Life House’s management, technology and design capabilities with real estate opportunities in high-barrier-to-entry markets traditionally overlooked by value-add investors. The result is authentic hospitality experiences for our guests and long-term value creation for our investors,” explained Blue Flag partner Jason Brown.
Across the current portfolio of four operating hotels in Miami and Nantucket, Life House is driving between 50% and 80% of bookings direct to its website (representing a 200-300% improvement over a typical independent hotel in the U.S.) while increasing net operating income between 40-100% during the first year of operation.
In contrast to the growing number of apartment and short-term rental companies (which sign long-term leases and take on significant balance sheet liabilities), Life House is an asset-light management company that earns fees for designing and managing hotels.
This business model is more similar to an enterprise SaaS product than a real estate product, which has made it an attractive venture for Silicon Valley investors. And Life House continues to innovate and establish its operating model by maintaining an initial focus on smaller hotels — which are the most underserved and most challenging to operate profitably.
“We’re quickly proving to be, along with our real estate partners, the best buyers of hotels with fewer than 150 keys,” noted Bryan Dunn — Life House’s VP of Acquisitions and Business Development. “Our technology-enabled approach to hotel operations allows us to extract maximum value for our investors from these traditionally overlooked assets.”
