NEW YORK—Life House, the vertically-integrated hotel company with a growing collection of lifestyle boutique hotels, has secured $100 million in equity commitments (approximately $250-$300 million in total asset value) from Boston-based investment and development firm Blue Flag Partners to fund its continued expansion through the acquisition of seven to 10 additional hotels.
The announcement follows the news that Life House has taken over the operation of The Roberts Collection, a historic 58-room hotel in Nantucket, Mass., that Blue Flag acquired in April. This season, Life House is operating The Roberts Collection as part of its white-label, tech-enabled management platform and will begin restoration of the hotel in fall 2019, transforming the property into a locally rooted hotel by Life House. The Blue Flag partnership provides fuel for Life House’s plans for rapid, asset-light expansion.
“Since day one, 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, 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—including Global Founders Capital, Comcast Ventures, and Trinity Investments—to develop proprietary technology that drives incremental revenue and automates operational efficiencies. Through the repositioning of the Nantucket project alone, Life House is projected to increase NOI by more than 100 percent 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 percent higher total revenue with nearly 80 percent direct web bookings,” said Terry Sanford, 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.”
During its first year of operation, Life House has signed more than 500 rooms across nearly 10 projects, spending less than $5 million of venture capital and positioning the company to raise a Series B this summer. By 2020, Life House will have over 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,” added Jason Brown, a partner at Blue Flag.
In contrast to apartment and short-term rentals, 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, making it an attractive venture for Silicon Valley investors.
Life House’s initial focus is on smaller hotels, which the company said 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,” said Bryan Dunn, Life House’s vice president 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.”