SOLD in Bar Harbor - Acadia Hotel

Acadia Hotel - Mount Desert Street - Bar Harbor, Maine

SOLD on December 21, 2012.  There are ten guest rooms and a two level owner's apartment with one  bedroom.  The property is located across from the Village Green in the middle of "downtown" Bar Harbor - next to the Abbe Museum. 
The property sold for $1,250,000. 

Yellow House in Bar Harbor - SOLD

                   Yellow House - The Field - Bar Harbor

The Yellow House is a beautiful, very popular Bed & Breakfast Inn nestled in a private enclave in downtown Bar Harbor.  There are six spacious guestrooms and an apartment with large living area and kitchen, bedroom and bath.  The apartment has a separate entrance.
The sale price was $1,400,000.  There is room on the property for a 3000 square foot one or two family cottage. 

Mayans?

So, one of two things is going to happen tomorrow -

1.  The world will end.

2.  We will have two Inn closings, back to back. 

Either will shock me - one would be horrible - one would be fantastic. 

However - BOTH would be the biggest bummer of all :) 

Downeast Magazine December

Mercury in Retrograde

OK, so a lot of people don't believe in this OR don't even know what it means for Mercury to be in retrograde, but I do.  :)  And therefore, I am patiently waiting and hoping that the contract that the lawyers are preparing on a newly agreed upon Inn Sale doesn't get done until next week - when Mercury is safely out of Retrograde and doesn't mess around with contracts....  look it up! :)

Happy Thanksgiving! 

Second Showing Today on Yellow House In Bar Harbor

So, the really great thing about Yellow House is that it is not only a gorgeous inn, beautifully restored with a sophisticated flair, but the lot is also so large that an enterprising buyer can add rooms in the future.  Beautiful. 

Random Pics from photo shoot at Inn at Southwest

Primrose Inn - Bar Harbor - SOLD

The Primrose Inn has SOLD in Bar Harbor.  The Primrose is located on the corner of Mount Desert Street and Holland Avenue.  The previous owners made a huge investment into the property which conveyed completely turnkey with no deferred maintenance.  The building is in outstanding condition. 

The sale price was $1,990,000.  The GRM is 5.43. 

Spring is here!

It is scramble time for people thinking they would be in a property, living the innkeeper life for the 2012 Season.  By the looks of the traffic in Bar Harbor today, the "season" is here. 
It isn't too late though.  When I started my Inn Brokerage career in the last '80s, almost all of our closings were between April 1 and May 15.  If you didn't have your property lined up by then, you waited until the next season.  Since then, we have had many a closing in the middle of the high, high season, August 1, July 20th - turnover has been seamless in most cases.  The only complication is the guests that check in with one owner and have breakfast with another.  However, most of them love the idea of being the first guests of owners beginning their innkeeping life - a chapter many have waited and dreamed about for years. 
Most of the Inns we worked with years ago were very seasonal too - so closing in spring only made sense.  More and more properties have extended seasons or are open year round.  There is more and more of a call for that in many regions of Maine.
My favorite recent conversations have been those with bankers saying they want to finance strong Inn/B&B properties for new owners.  They are ready to help us make things happen.
So, don't let the fact that April 1st has passed make you think it is too late for 2012 - we still have time to get new buyers in place to enjoy what promises to be a strong Maine visitor year.  Life is short!  Let's roll!  

Primrose Inn in Bar Harbor UNDER CONTRACT

Primrose Inn is located on the corner of Mount Desert Street and Holland Avenue in Bar Harbor - one of our historic districts with several beautiful inns.  The current owners of the Primrose made very significant improvements to the property making it completely turnkey with room to continue to grow the business.  This is a solid business and a beautiful property. 

Combining advertisement and editorial....

Inn Potential

We don't often promote starting a B&B from scratch unless you are very well capitalized and the location, structure and community are too good to resist. This is rare. The Carriage House at Bogue Chitto MAY be a great candidate. Literally across from the entrance to Acadia National Park in Bar Harbor. Hmmmm.....

Gross Income Multipliers again...

I have had some great conversations since my last post on using Gross Rent/Income Multipliers in inn sales. Thank you all.

One important issue that several people brought up was the Rent/Income component - what actually is INCOME when using the GRM method of establishing value?

To make things clean and simple, the income/rent we refer to when using the gross multiplier is room income. This is room income that does NOT include sales tax. Historically, it has never been consistent whether sellers are using sales tax in their income figure or not. This is the first thing a professional, experienced inn broker asks. Sales Tax is not your money, you are simply collecting it for the State of Maine and passing it on. It should never, ever be included in income when establishing value. Including sales tax can throw off the figure so much, in some cases, it can destroy a transaction.

Let's say that we are dealing with a popular inn where the gross rent income from rooms is $700,000. The sales tax charged on those rooms would have been $49,000. If included when the value analysis is done, assuming a 5 GRM, the indicated value is thrown off by almost $150,000. A buyer who has assumed that the seller and the broker have represented the income honestly is performing their due diligence based on an inaccurate number. When this discrepency is discovered not only will the buyers time have been wasted but the honesty and professionalism of the broker and seller will be questioned also.

The use of a GRM becomes more complicated when food service is included (other than breakfast which is expected) or other income sources such as gift shop in the inn. I recently reviewed an inn's profit and loss statement that showed six different income sources. I had to boil it down to the actual room rent and figure out the value of the other income streams on another basis.

Bottom line, there are many, many facets to establishing value of an income producing property. A Inn is even more challenging because of the hybrid nature where a business and a home exist in the same space.

The use of a GRM is a down and dirty way to look at value but it is not the final say. I use a GRM all the time when I look at properties to consider if they are in the ballpark - assuming that there are features of the property that I don't yet know which can affect the indicated value. If the asking price of the inn appears to be reflective of the GRM then I share it with clients, if it is way off I have to first investigate - Why? Are there other features to the property that would not show up in a GRM value calculation or is the property just overpriced?

One of the most important considerations in using a GRM is to establish that the seller and the broker have disclosed the income properly - ask the question. Most importantly, ascertain early that sales tax is not included in the stated gross income.

Sneak Peek at our newest print ad

What is this GRM thing?

I love working with new clients. They have usually been bombarded with information and their heads are swimming. It is my job to help wade through the hyperbole and help clients get a clear picture of what everyone is talking about.

So, to start somewhere, what is all this talk about GRM, GIM, ROI, NOI, LTV and on and on? Let's focus on one of the most confusing, but really simplest concepts... well.... simple until it gets complicated.

GRM or GIM refers to the Gross Rent Multiplier or Gross Income Multiplier. The GRM/GIM is simply a number - a factor if you will - identified through analysis of sold properties, used to indicate the value of a property in a simple manner, quite frankly, an OVERsimplified manner.

One simply identifies the proper GRM by talking with industry experts - bankers, appraisers, brokers - and multiplies the gross income of the subject property by the GRM to arrive at an indicated value. Easy enough, right? So, assuming that you have been told that 5.1 is the current GRM used in the B&B business and you are looking at a property that shows an income of $100,000 then, 5.1 X $100,000 = $510,000. Simple. Done Deal.

But wait.... not so fast. There are myriad factors that need to be considered that are not reflected in a GRM. When clients tell me that they have been told that the B&B industry GRM is "x" across the board, I tell them that they are talking with someone who doesn't understand the broad expanse of the Inn business.

Identifying a GRM/GIM is important but not the final say on value. Those of us who are the "industry experts" know that a baseline GRM is great indicator of base value but then we have to look at each property individually and consider how this property has to be adjusted to reflect items not acknowledged in the baseline GRM. There are LOTS of unique issues.

For instance, owner's quarters are one of the primary "adjustments" made to the GRM indicated value. Whether superior or inferior to the properties reflecting the current GRM, adjustments need to be made to the indicated value. Assuming a GRM of 5 is the average, a property with no owner's quarters will likely require a reduction on the value indicated by use of the GRM. At the same time, a property with expansive, superior owner's quarters will require an adjustment to increase the value that is indicated by the GRM.

A frequent argument we hear is the fact that a property is on the ocean should increase the GRM. That is not necessarily true. Yes, if the inn has a gorgeous oceanfront residence that the owner can enjoy, an adjustment is in line. However, an oceanfront location will already be reflected in the indicated value arrived at using the GRM because we use the INCOME of the property and INCOME of the property has already been positively affected by the oceanfront location. A six room in sitting on a private, oceanfront point will likely have higher room rates and occupancy than a six room inn on a side street with no parking - so the value of that location has already been reflected in the income when you multiply the income by the GRM.

I am REALLY simplifying the whole GRM concept just to get you familiar with the idea. There are SO many other factors. I am going to leave the discussion of the income used to multiply by the GRM for the next post. That is a whole other complicated issue.

Gross rent multiples, while seemingly a simple method of establishing value, have lots of drawbacks which is the reason they are used along with other indicators of value, not on their own. In order to keep up to date with the market you will want to find out how the GRM that you are given was arrived at. In the next post we'll look at a particular property and how we arrive at the GRM for that inn and how that GRM should be used to indicate value in others.

What is "turn key" ?

Turn-key is a term frequently used when selling businesses. People have many different definitions of turn-key. My definitition, when it comes to Inns and B&Bs, of turn-key is being able to purchase an Inn, walk in and welcome guests that very same night. That definition makes very few Inns truly turn-key but makes most practically turn-key.
Most inn sales include all of the furniture and appointments in the guest rooms. Art work is often the exception. It is not unreasonable for the pieces that are leaving with the seller to be substituted. In most cases, the buyers will have pieces that they want to include in the guestrooms anyway.
The public space of the inn often has pieces of furniture and art that are special pieces to the owners, it is what helps personalize the inn and reflect the style of the owners.
Rarely does anyone expect the owner's space to have any furniture remaining.
I recommend to my seller clients that they remove any personal things from the public part of the property that will not convey, if possible. If there is anything major not staying with the property that is present at a showing, this should be disclosed at the very beginning.
We have sold many, many inns over the years - since starting this specialty division in 1986 - and I have seen the personal property list become a problem many times. We need to bring this issue to the table much sooner than we do both as sellers and brokers.
I have been on both sides of transactions both as a broker and as a buyer/seller. Both sides need to be reasonable but the greatest advice I can give is for sellers to remove things that will not be staying with the sale or identify them at first showing if they are non-negotiable items.