Highside likes extended-stay’s upside

DENVER – A real estate developer who from 2017 to 2019 managed Choice Hotels’ real estate capital program is now partnering with his former employer and just secured $500 million in financing from Apollo to grow Choice’s Everhome Suites midscale extended-stay brand with a goal of reaching $2 billion assets under management over the next decade.

Highside Companies Founder and CEO Justin Roberts told Hotel Investment Today that the integrated real estate company is taking on the role of general partner in each deal and expects to hold between 10% and 20% of the equity in most. Currently, Highside has opened nine Everhome Suites, has another 20 or so that have broken ground, and has eight under pre-development. Highside is actively pursuing additional partnerships and development opportunities across North America to create another 10 to 15 Everhome deals a year, leveraging its platform expertise and strong institutional relationships.

The deal with Apollo came about after Choice Hotels disclosed in its 10-K filing that in early July it entered into a joint venture agreement with Denver-based Highside Companies. Choice sold four under-construction Everhome projects to the JV for $52 million and is contributed $71.6 million to the JV in exchange for an 80% equity ownership interest.

Highside Companies opened the Everhome Suites Cheyenne in Wyoming in late 2024.

Choice has also provided a 15% limited debt guarantee on a project-by-project basis upon each hotel’s opening (or 18 months after the start of construction).

A deal with Choice is a “value add” for Highside as it helps court more investors with Roberts adding that he has good standing relationships there and can navigate deals better because having been on the inside he knows what’s important to them from a growth perspective.

Highside sources equity investors for its deals and raises a fair amount of capital through the registered investment advisor channel. “Obviously, with Apollo coming in, we have a pretty attractive structure that allows us to maximize our opportunities,” Roberts added.

The $500 million loan facility with Apollo is supporting approximately 35 existing and new Everhome projects expected to be completed in the next five years. While Roberts wouldn’t discuss deal terms, the transaction marks one of the largest extended-stay financings in the U.S. midscale segment in recent years.

With more than two decades of real estate development experience, Roberts said Highside is also looking at potential portfolio acquisitions as well as value-add opportunities for the Everhome brand. At the same time, he said they will look to add as much as $700-800 million in assets under management with other select-service brands, including some select-service hotels under big flags such as Marriott.

Currently, Highside has a shade under $1 billion in assets under management with about 80% in the hotel space. Moving forward, the Everhome Suites deal will drive most of their activity, but Roberts said they are still actively involved in looking at multifamily and some self-storage deals.

Attractive returns

Highside is especially bullish about extended-stay with Roberts witnessing first-hand Choice’s acquisition of the Woodspring Suites brand and recognizing the ability to drive both top line and margin.

Everhome Suites guestroom

“On the GOP line, maybe you're getting 10% more than a traditional midscale select-service property, and sometimes more than that, which makes for a pretty attractive investment profile,” Roberts said. “So, extended-stay really became our focus for where we wanted to allocate dollars and where we wanted to spend our time.”

Roberts said the GOP line should hit 50% and he thinks they can do better in some instances.

The bigger goal is to build an institutionally scaled extended-stay portfolio in the range of 100 assets. “We’re not merchant builders,” Roberts said. “We’re not looking to build and create value and sell it off. We’re interested in building value and then retaining that value in a controlled portfolio for an extended period of time.”

On the GOP line, maybe you're getting 10% more than a traditional midscale select-service property, and sometimes more than that, which makes for a pretty attractive investment profile.

Justin Roberts

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Highside is looking for opportunities from coast to coast in markets and submarket that have the right demand drivers and investment fundamentals. What they are not interested in, said Roberts, is long lead times and re-entitlement projects, which crosses off a lot of coastal markets opportunities.

“This is more about finding markets that work well, where this business already exists, get it entitled and designed within 12 months,” Roberts said. “Then get the hotel open as quickly as possible.”

Getting open quickly is particularly important these days with the costs of development escalating. However, Roberts said he is seeing costs stabilize and he is even starting to get more attractive pricing from contractors.

As for concerns about tariffs, Highside talks about it a lot, but Roberts said they have not seen any dramatic impact yet. So far, Roberts added, lead times for tariff-related cost increases have been longer than most people thought.

Bigger picture, Highside and Roberts feel very confident of growing their hotel portfolio, particularly in the extended-stay space where the supply dynamics remain very good. “We feel very good about the national story in North America, and we are also looking at Canada as a potential expansion opportunity,” he said.

Where developers need to be careful, Roberts added, is about how capital structures are put together. “There is a lot of debt available for this and other asset classes. You have to be selective, though. There’s a lot of overpriced debt still kind of hanging around out there that hasn’t yet transitioned back into the equity market.”