LuxUrban Hotels, which utilizes an asset-light business model to lease entire hotels on a long-term basis and rent out hotel rooms in these properties in key major metropolitan cities, has committed to growing its business through non-dilutive funding options. This approach to growth is supported by its recent agreement with Wyndham Hotels & Resorts, the successful completion of balance sheet initiatives that have strengthened the company’s financial position and enhanced liquidity, and its ability to leverage its improving asset base to secure non-dilutive funding.
“We believe that we have created a model that offers a clear path to funding our growth through at least the end of 2024 via non-dilutive financing options and significant flexibility with respect to capital allocation,” President and Chief Financial Officer Shanoop Kothari said in a statement. “The cash generative profile we have created for the company is expected to result in sustainable, free cash flow beginning over the next few quarters driven by our improving business operations, benefits of scale, and the elimination of long-term debt and future payment obligations. In addition to our internal efforts, the capital commitments associated with our collaboration with Wyndham Hotels & Resorts are expected to augment and accelerate our anticipated growth in a non-dilutive manner.”
Agreement with Wyndham Hotels & Resorts
LuxUrban entered into an agreement with Wyndham Hotels & Resorts under which the company’s existing portfolio of hotels and future properties will be added to the Trademark Collection by Wyndham brand. Under the agreement, Wyndham will provide LuxUrban with approximately 50 percent or more of all capital required for new acquisitions based on the company’s current and historic underwriting guidelines. As LuxUrban opens new hotels on the Wyndham platform, Wyndham will reimburse LuxUrban approximately 50 percent of the security deposit in the form of “key money” to be used for ongoing working capital, capital improvements and new hotel acquisitions. This provides LuxUrban with 150 percent or more of buying power on new hotel openings and delivers capital back into the business as it opens new hotels.
LuxUrban expects to open at least 60 percent of its current hotels under the Trademark Collection banner by September 30, with the balance of its properties integrated by the end of the 2023 fourth quarter. This schedule would provide the company with an estimated additional $7.1M of non-dilutive growth and working capital through 2023. Any new hotels acquired by LuxUrban and added to the Wyndham platform would be incremental to the estimated $7.1 million with no substantive limitations on growth of the joint portfolio.
Expand pipeline with non-dilutive capital
LuxUrban continues to organically add high quality hotel assets to its portfolio via long-term Master Lease Agreements, expecting to have 2,500-3,000 total short-term stay hotel units operational by December 31.
Greenle Partners, LuxUrban’s second largest shareholder, has agreed to waive all registration rights on all prior share issuances, and any new share issuances as they occur, for a minimum of 12 months on a rolling basis from the date of issuance assigned to each tranche of shares eligible for registration. Under the original agreement between LuxUrban and Greenle, the shares covered by this waiver were eligible to be sold at specified dates and amounts ending in 2025.
The shares owned and to be issued to Greenle were acquired in exchange for the elimination of the entirety of $9.8 million of senior secured debt and an estimated $87.5 million in revenue share payment obligations. These shares will continue to be subject to a blocker provision, which restricts Greenle’s beneficial ownership to 9.9 percent of the company’s outstanding common stock, as well as leak out provisions and certain lockups ending in 2025.