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Crowdfunding Spreads to Hotels as Hard Rock Sells Stakes

Hard Rock Hotel Palm Springs' flashiness may help create demand among individual investors.

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Open Source: Hard Rock Hotel Palm Springs

Hard Rock Hotel Palm Springs' flashiness may help create demand among individual investors.

Real estate crowdfunding is spreading to the U.S. hotel industry, offering individual investors perks such as room upgrades along with an interest in the property.

The owner of Southern California’s Hard Rock Hotel Palm Springs is selling stakes in the 163-room luxury resort, with investors receiving such benefits as improved bookings, room-rate discounts and free use of a poolside cabana set aside for hotel owners. The offering, which started yesterday, is the first of its kind for an existing hotel, according to online marketplace Realty Mogul and Kittridge Hotels & Resorts LLC, the property’s majority owner.

Crowdfunding, in which large amounts of money are raised through small contributions, has been on the rise in commercial real estate and probably will gain popularity among hotels as investors seek to put money into “an existing asset they understand and can use, ” said Steve Cinelli, chief executive officer of online marketplace Primarq Inc.

“With crowdfunding in the lodging space, what you’re looking to do is not just provide a stake in a hotel but also perks, ” Cinelli said in a telephone interview. “Besides raising capital, you’re building an audience. That’s why lodging makes so much sense for crowdfunding.”

Source: Hard Rock Hotel Palm Springs

The Palm Springs property, purchased in September 2012 for an undisclosed price, was closed for renovations last July and reopened under the Hard Rock brand in October.

The Palm Springs property, purchased in September 2012 for an undisclosed price, was...

Open Source: Hard Rock Hotel Palm Springs

Primarq, which brings together property owners and investors, is planning to use the strategy to raise money for two hotels in the San Francisco Bay area, where the company is based, Cinelli said.

Hotel Conversion

Kittridge is seeking to raise as much as $1.5 million within four weeks to build a new nightclub at the Hard Rock and recoup some of its original investment, said Andy Carpiac, president of the Calabasas, California-based company.

The Palm Springs property, purchased in September 2012 for an undisclosed price, was closed for renovations last July and reopened under the Hard Rock brand in October. Kittridge spent $8 million on the conversion and upgrades, according to Carpiac.

“We expect a fairly large amount of investor interest because we have many fans of the hotel and the brand, ” Carpiac said in a telephone interview. “They come here and stay with us, they spend money here, they bring their friends and family and act like real owners, which they should. It benefits them and it benefits us.”

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