Inside Damon Healey's passion for scale in extended-stay

BETHESDA, Maryland — Damon Healey caught the “bug” for economy extended-stay hotels while he was at Brookfield Asset Management. Now, he has formed a company with a mission to scale that asset class on a national level in what is becoming an increasingly crowded space.

“Our core thesis is… we have the capabilities to really scale into this asset class,” said Healey, founder and managing principal for Bethesda, Maryland-based Eternal Companies. “We think that’s a unique skill set… Our goal is to expand through acquisition and then start to dive into the development markets on a strategic basis. That strategy also gives us time to see how all of the other brands shake out.”

Healey made headlines in late August by getting the first contract awarded by Choice Hotels International for its newly reintroduced SOAR program, which is designed to create hotel ownership opportunities for underrepresented entrepreneurs. On May 30, Eternal Companies converted two properties in Georgia to Choice’s Suburban Studios extended-stay brand: the 92-key Suburban Studios Columbus Bradley Park in Columbia, Georgia, and the 73-key Suburban Studios Macon North in Macon, Georgia.

Healey got his start in commercial real estate at places like Key Bank Real Estate Capital, Jair Lynch Development Partners and the grocery chain Lidl U.S. before moving to Brookfield, where he got his first taste of hospitality. The company was buying 100 of Choice’s WoodSpring Suites extended-stay hotels and needed someone to help them expand the portfolio. Healey developed 10 to 15 hotels and acquired some for Brookfield, as well.

The Suburban Stadium Columbus Bradley Park was one of the first assets acquired by Eternal Companies.

When the portfolio was sold to Blackstone and Starwood Capital Group in early 2022, Healey said he knew it was time to form a new company based on the skill set he had acquired. “What I learned is that there just weren’t a lot of players doing [economy extended-stay] at on a national level,” Healey said. “The idea behind our extended-stay strategy is we really know how to do this.”

Healey admits that the extended-stay space is becoming increasingly crowded, with all the major hotel brands launching new brands and building hundreds of extended-stay hotels across the U.S. “There are so many players now in the space, and so I had to really think about where we were in the landscape and, with all of the new brands coming in, where can we play in the space currently, and then try to expand that going forward.”

That’s when Eternal settled on doing conversions in the economy extended-stay space. “We knew what construction costs were because of the hotels that we have built while at Brookfield,” Healey said. “Staying in touch with industry participants and understanding what RevPAR you need to continue the profitability that extended-stay economy is known for. We felt like the conversion opportunity, at least in the short term, was the better opportunity to get started.”

Eternal is funded through a combination of self-funding along with a group of investment partners. Healey said the company will then essentially syndicate each of its future deals. “We have a core base of investors that are interested in what we’re doing,” he said. “Then we are also expanding that out to limited partners, potential limited partners via fund vehicles or joint ventures for folks that are interested in really getting into the space.”

Inside the first deal

Healey admitted the deal landscape has changed since his days at Brookfield, especially with higher interest rates and the current capital market. “The lending market has been a challenge and the capital raising market has been a challenge,” he said. “We call it a win to be able to do a two-pack on our first deal coming out.”

Eternal worked with Phoenix-based Arriba Capital to finance its first deal. (Choice also said it offered key money in the deal, something Healey confirmed.)

Although Healey said it wasn’t his first choice because of its time to close, the company went with an SBA loan for its first acquisition. He said that because Eternal maxed out its SBA capacity with its first deal in the future, the company would have to look elsewhere for lending (he said it would likely be private debt markets because of the speed they offer).

“We had offers from some of the debt funds and things of that nature but knew that the SBA was going to be our best route for our first one,” he said.

Part of the thesis, in terms of doing conversions, is you’re buying existing cash-flowing assets right at the peak of the interest rate market.

Damon Healey

Share this quote

Looking back, Healey said the SBA loan was very competitive, especially because the company is banking on rate cuts coming for the variable-rate loan.

“Part of the thesis, in terms of doing conversions, is you’re buying existing cash-flowing assets right at the peak of the interest rate market,” he said. “We had some private groups that were willing to fund within, like, 21 days, for example, but the cost of that loan was substantially higher.”

Eternal converted the two hotels in only 30 days, something Healey said his company can’t take all the credit for. “Honestly, it’s a credit to Choice and our management company (Cleveland-based J&P Asset Management),” he said. “A combination of all of us came up with a plan that said we can implement our PIP in phases. The good news is when we took over these hotels, the occupancy was pretty good. I believe they were both in the 70s… We said to Choice that we don’t want to lose this business.”

Healey said that the initial PIPs were completed in July, and both hotels have had occupancy in the 80s and 90s this summer.

As for the assets themselves, Healey said the key was the demand drivers and a hotel that already had quality ownership and management before. He said both are military towns. “They are secondary markets, but they’re relatively robust markets, and our primary investor was also familiar with those markets due to some investments that they made in other asset classes,” he said.

Black ownership in hotels

Healey also knows that the hospitality industry has a long way to go in improving the percentage of Black hospitality owners. Research from the National Association of Black Hotel Owners, Operators and Developers in 2023 showed that despite nearly 20% of the lodging workforce being Black, less than 2% of hotel owners are Black.

If we can build more capacity amongst African Americans and other Black folks to be able to do this and do it confidently and present themselves in a way that can attract the capital, that’s key because that’s always the number one issue.

Damon Healey

Share this quote

“It’s something that I am passionate about and it’s something that is needed, for sure,” he said. “I’ve been in the commercial real estate space for a while, and I’ve been used to not seeing a lot of people like myself.”

Healey said he’s pretty low-key and not really used to a lot of attention, but he is happy to be visible and a role model in this area, both for Choice’s SOAR program and Black representation in the hospitality industry in general.

“What resonates with me is looking at who I was 20 years ago and saying if I can inspire that person or someone else who says, ‘Hey, this is going to be too difficult,’ or ‘There’s not a pathway for me to be able to own a hotel or really get into the largest segments of real estate,’ that’s what motivates me… I’m proud of being an ambassador, so to speak, in that regard because it’s much needed.”

Healey said within Eternal’s core group of investors are five African Americans who are all new to hospitality ownership. “If we can build more capacity amongst African Americans and other Black folks to be able to do this and do it confidently and present themselves in a way that can attract the capital, that’s key because that’s always the number one issue.”

What’s in the pipeline?

Healey said Eternal would like to make four more acquisitions before the end of the year, maybe all in one deal. “We prefer to target portfolio transactions if possible,” he said. “Taking down three or more at a time would be our preference… For the investor base we are targeting, that’s the model that works well for us… We love to scale, and that’s where we see a competitive advantage in the marketplace.”

Healey’s long-term vision for the company is to expand in the economy extended-stay market. He added he would be “ecstatic” if the company had a portfolio of 20 to 30-plus hotels within five years.

Healey said he would love to work with Choice again, especially because of the support the SOAR program offers. “One of the things I’ve learned in my career is to be successful, you need to be focused, and so we love to rinse and repeat what we’ve done here,” he said. “We are open to other brands, but our primary objective right now is to rinse and repeat with Choice if we can.”