Worth the Wait

What is Experiential Hospitality with Isaac French?

This is the audio version of my weekly newsletter, Experiential Hospitality, where I share stories and insights to help you craft unforgettable spaces and experiences through design & hospitality.

Worth the wait.

Today's letter is about a friend
who turned a rotting iron workers

camp in rural Maine into a one
of a kind hospitality property,

and then pulled every dollar back
out without selling anything.

I'm breaking down the numbers, so
if numbers bore you skip this one.

But if you dream of creatively financing
unique projects and preserving pieces

of history, pay close attention.

A couple Autumns ago, I was
visiting family in Maine when

one of our very own experiential
hospitality community members,

Eddie invited me to tour a property.

He was working on 10 shabby cabins
on a forested stretch of waterfront.

40 minutes from Acadia.

Built a century ago as
an iron workers retreat.

The place was half collapsed.

Utilities pretty much
non-existent, a complete mess.

Eddie saw something else
though and went all in.

A couple months ago, that same
property appraised at $2 million, and

Eddie walked away from his refinance
closing with every dollar of personal

savings he'd put in while keeping
the property, the business, and the

cash flow and exit without exiting.

Here's what it actually took first.

The deal almost didn't happen.

Eddie went under contract in 2022 and
spent months in painful due diligence

only to have the sellers try to back out.

He filed suit and spent 25,000 in legal
fees forcing them to honor the contract.

After a year long legal fight, he finally
closed in December, 2023 for $800,000

with a $75,000 seller credit for the
broken septic and water systems, which

essentially covered his $50,000 down
payment and reimbursed his legal costs.

He arrived at closing with
effectively nothing out of pocket.

Then the real messy fun work began.

The construction phase was brutal.

After a lot of difficult nos, he finally
convinced a local bank to trust him

with a commercial loan of $561,000
at eight and a half percent interest

and a construction loan of $187,000.

The sellers carried a note of 189,000
starting in early 2024, Eddie, by

through that construction loan in short
order repairing septic water and roads.

Before touching a single
cabin, what remained?

He stretched across, maxed out 0%
business credit cards, and a line

of credit he'd slowly built up.

By July 1st, he fixed up five
of the 10 cabins, new bathrooms,

interior walls, furnishings total
phase one hard costs of $280,000.

This kind of white knuckle,
bootstrapping makes me nod.

The Live Oak Lake journey
was full of the same thing.

There's a strange and comforting
comradery in knowing you

weren't alone in your craziness.

The first summer was a
great proof of concept.

Demand was real, but the property
wasn't designed to run at half capacity,

and he was losing money every month.

Opportunity, cost and speed to market,
less than complete at one point, sitting

on the edge of opening for spring 2025
with hundreds of thousands in short

term debt and all his savings committed.

Eddie told me it was the most
nerve wracking period of his life.

He's 30 no dependents yet,
and five years into taking

calculated risks in real estate.

Even still, this was his
real moment in the furnace.

He finished the remaining five cabins
over the winter, another 150,000 of

costs with a hundred thousand of interest
alone during construction and ramp up.

Year two changed everything.

With all 10 units open, the property
performed exceptionally well.

95% occupancy, $175.

Average daily rate, 330,000 in total
revenue, 35% operating expenses.

Which is a testament to the Leann
tech enabled model he had built.

All of that resulted in 200,000
net income, a hundred thousand

of which was net cash flow.

After debt service by November, he paid
off every credit card and line of credit

just using the operating cash flow.

Then came the refinance.

The appraiser valued the property
at $2 million using a 10% cap rate.

Eddie's bank was surprised.

They'd committed to 80% loan
to value, then got cold feet.

He pushed back and they settled on 72.5%

loan to value, which meant $1.2

million at closing, plus a $250,000 line
of credit for future projects, which he

only pays interest on when he draws it.

I think this structure is brilliant
at closing the funds landed like this.

748,000 to pay off the bank, the
purchase loan, and the construction loan.

189,000 to retire the seller
note, and 253,000 back to Eddie.

Essentially, his entire
impersonal investment returned.

He created roughly $625,000 in equity.

The property projects $60,000
a year in passive cash flow.

With plenty of room to appreciate
the ADRs and all of this.

On a new 25 year note, $250,000 sits
available for whatever he builds next.

The cabins certainly aren't luxury.

They're actually quite quirky.

He did a lot of the work himself
on a shoestring budget, but they

have loads of character And this
waterfront property steps from the

water impossible to build today.

Under current shoreline restrictions
will only become more valuable with time.

Guests are raving about the place.

So here are a few key takeaways.

Eddie's story is a real life
illustration of conviction of seeing

something no one else wanted to touch.

Grinding through 18 months of
financial stress and coming out the

other side with something he'll be
proud to own and reap the fruit of.

For decades, he wishes he'd moved
faster on construction, he wishes

he'd invested more in marketing.

He wishes he'd documented
more of the journey in public.

I learned all the same lessons
building Live Oak Lake, which is

exactly why I'm sharing this story.

If you've got a dream to do
something similar, let our costly

tuition count for something.

But he did the thing and somewhere
out there, maybe 40 minutes from a

national park, maybe along a forgotten
river, maybe at the edge of a small

town that used to be something.

There are hundreds more of these
kind of properties waiting for

someone with the eyes to see them.

You don't need hundreds
of thousands in savings.

You need a dream and a work ethic
and a high tolerance for pain.

Capital can be assembled.

Conviction cannot.

Hope you all have a wonderful week.

See you next time.