Sell Your Hotel on Your Terms.
For owners of successful select-service hotels, a conventional sale often means one closing date, one large tax bill and the end of your role with the property. We offer a better-planned alternative: sell the hotel through a debt-free trust, receive your proceeds — and recognize your gain — in stages as shares sell, and, if you wish, keep managing the hotel you built.
When a Great Hotel Becomes Hard to Let Go Of.
For owners who have held appreciated hotels for many years, running them usually isn't the hard part. The hard part is everything that comes with trying to get out.
The Tax Bill
Sell a hotel you've owned for a long time, and a large share of the proceeds can go to taxes all at once: federal and state capital gains tax, “recapture” tax on years of depreciation — including tax at ordinary income rates on the furniture and equipment — and a further 3.8% tax on investment income. What's left to reinvest can be far less than the hotel is worth.
Too Many Eggs in One Basket
Decades of success in hospitality can leave a family's wealth tied almost entirely to hotels, often in just a few markets. A downturn in travel, or in one city, affects nearly everything you own.
Planning for What Comes Next
At some point, every owner wants to step back — or at least step back from ownership. The question is whether that happens on your terms, with a plan, or is forced by health, family circumstances or the market.
A Sale Designed Around the Owner, Not the Buyer.
You sell the hotel in full. Its real estate moves into a debt-free trust, and shares of the trust are sold to investors over roughly six to twelve months. You're paid — and recognize your gain — as each share sells, so your tax is spread across the sales process rather than falling on a single closing date. If you wish, your company may continue to manage the hotel, keeping its staff and its management income.
For selected hotels, a direct contribution option may also be available. We'll discuss whether it suits your hotel in a structure review.
Sell in Stages, on Your Timetable.
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01
We Set Up the Trust
RREI sponsors the trust, pays to form it and works with securities and tax lawyers to structure it properly. You keep running your hotel throughout.
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02
Your Hotel Moves Into a Debt-Free Trust
Any existing mortgage is paid off at or before this point, so the trust owns the hotel free and clear. The price is based on an independent third-party appraisal. Moving the hotel into the trust is structured so that it doesn't, on its own, trigger tax — tax arises as shares of the trust are sold.
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03
Shares Are Sold, and You're Paid as They Sell
Shares are offered to investors completing 1031 exchanges, through a licensed broker-dealer, usually over six to twelve months. You receive proceeds — and recognize gain — share by share.
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04
Management Can Stay with You
If you choose, your operating company leases the whole hotel back from the trust under a long-term master lease and keeps running it, with its franchise agreement, staff and operating income. If you'd rather step back entirely, another qualified operator takes on that role.
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05
The Trust Runs Its Course
After a planned hold of about five years, the trust's investors decide whether to take cash or exchange their shares for units in RREI's hotel REIT.
How Staging Your Tax Works
In a conventional sale, your whole gain is taxed in the year the sale closes. Selling through a trust changes the timing. Because you're paid as each share sells, you recognize your gain in stages across the sales period. Depending on when that period begins and ends, recognition may fall across more than one tax year — giving you more control over when your tax is due. To be clear, this spreads the tax out; it does not defer it.
What Goes Into the Trust — And What Stays with You
Where your company stays on to run the hotel, the land and building go into the trust and are sold to investors, while the operating business — and everything inside the hotel, from the beds and furnishings to the equipment, known as FF&E — stays with your company as master tenant. Because the FF&E isn't sold, the ordinary-income recapture tax on it isn't triggered when the hotel moves into the trust. That tax is postponed, not eliminated.
What Goes in the Trust, What Stays Yours
contributed Operating business
retained
Structural overview only; not tax advice. FF&E treatment subject to confirmation in definitive documents.
How the Hotel's Income Is Shared
The operating company collects the hotel's revenue and pays its operating costs. It pays the trust a fixed monthly base rent, plus additional rent calculated as a share of gross revenue in stronger periods, and keeps what remains, together with its management fee. The trust's share is always based on gross revenue, never profit, to protect every investor's 1031 treatment.
Cash Flows Under the Master Lease
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1Operating Costs
Staff, franchise fees, taxes, insurance, management fee, FF&E reserve
(Stays with the operating company) -
2Base Rent
Fixed, paid monthly — the investors' floor
(Goes to the trust (investors)) -
3Participation
Additional rent on gross revenue above set breakpoints
(Goes to the trust (investors)) -
4Operator's Remainder
What remains after costs and rent, plus management fee
(Stays with the operating company)
Key: Trust rent is always based on gross revenue, never net income — a net split could imply a partnership and jeopardize 1031 treatment.
Illustrative mechanism only. Rent levels and breakpoints are set per transaction and disclosed in offering documents.
Three Ways to Sell a Hotel.
| Sell Outright | Direct 1031 Exchange | Sell Through an RREI Trust | |
|---|---|---|---|
| Tax | All due at closing — capital gains, recapture and the 3.8% investment income tax | Deferred, as long as you reinvest in time | Recognized in stages as shares sell, possibly across more than one tax year |
| Cash to you | Full proceeds at closing, before tax | None — proceeds must be reinvested | Received as shares sell, over about 6–12 months |
| Managing the hotel | Ends | Starts again at a new property | May continue, as master tenant |
| Time pressure | Immediate | 45 days to identify, 180 to buy | None — follows the sales period |
| Mortgage risk | Gone | Often a new loan at today's rates | Gone — the trust holds the hotel with no debt |
This comparison is for illustration only and is not tax advice. The right choice depends on your circumstances and on the final legal documents. Your accountant and attorney should confirm how any option would apply to you before you decide.
What You Gain — And What You Give Up.
| What You Gain | What You Give Up |
|---|---|
| Cash from an asset that is otherwise slow and expensive to sell | Any future increase in the hotel's value, which now belongs to the trust's investors |
| Control over the timing of your tax — recognized as each share sells | The cost of selling the shares — typically around 18–20% in this market — sits on top of the price, which limits how much the trust can pay |
| The possibility of keeping the management, staff and operating income | If you keep managing: fixed rent to the trust first, then a share of revenue above agreed levels |
| Freedom from mortgage risk | The ability to borrow against the hotel once it's in the trust |
| A defined, planned exit | Tax deferral — this path spreads your tax out rather than deferring it |
What We Need to See Before We Begin.
A select-service or limited-service hotel, generally eight years old or younger, flying a Marriott, Hilton, IHG or Hyatt flag. Portfolios are welcome, but each hotel is assessed on its own merits.
Any mortgage must be paid off at or before the hotel enters the trust, because a trust can never refinance.
The price is based on an independent third-party appraisal — not on what you paid, and not on our own estimate.
If you plan to keep managing, your company must have genuine business substance: the franchise agreement, the management contract, the staff and its own profit and loss.
A Clear Path, Measured In Months Rather Than Years.
Hospitality program timeline (not to scale)
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Qualify & price
Weeks 0–6
Screen, appraisal, counsel, debt plan
We review the hotel, order an independent appraisal, bring in legal counsel and plan how any existing debt will be repaid.
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Contribute
Closing
Hotel deeded to DST; reserves funded
The hotel is transferred into the trust. Reserves and the master lease are funded.
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Syndicate
Months 0–12
Interests placed; owner paid as they sell
Shares are offered through a broker-dealer; you receive proceeds, and recognize gain, as each one sells.
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Hold & operate
Years 1–5 (target)
OpCo runs hotel under master lease
The hotel is run under the master lease. The hold is timed to end before the brand's next required renovation.
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Elect
At maturity
Cash · own 1031 · §721 into REIT
Investors choose cash, their own 1031 exchange, or a move into RREI's hotel REIT.
Indicative. Actual timing and target hold are set at formation and disclosed in offering documents. Not tax advice.
Most hotel DSTs are planned for five to ten years. We aim for about five, so the trust ends before the brand requires its next major renovation rather than having to raise money for it inside the offering. The exact target is disclosed in each trust's offering documents.
A Share in a Debt-Free Hotel, Designed for 1031 Exchange Investors.
Our hotel trusts are designed for investors completing a 1031 exchange who want to own part of a newer, well-branded hotel without taking on mortgage risk or management responsibilities — and who would value the option, later on, of moving into a portfolio of many hotels.
What You Own
A fractional share in a trust that owns one debt-free hotel. The share is structured to qualify as replacement property for your 1031 exchange.
How You Earn Income
The hotel's operator pays the trust a fixed base rent under the master lease, plus a share of revenue in stronger periods. Because that share depends on how the hotel performs, your distributions can go up or down.
Who Runs the Hotel
An experienced operator — often the same one who built the hotel's success — leasing the hotel from the trust as master tenant, with a strong incentive to keep performing, because its own profit depends on it.
What Happens at the End
After a targeted hold of about five years, you choose: take cash, reinvest through your own 1031 exchange, or exchange your share for units in RREI's hotel REIT.
Why We Use No Debt
Hotel demand rises and falls with the economy, and we plan for that. Holding hotels without a mortgage means there is no lender to satisfy, no loan coming due at an awkward moment and no risk of a forced sale during a downturn. We want to be clear about the trade-off: without debt, the investors' income still moves with room rates and occupancy, and can vary more from year to year than income from a building leased to a single long-term tenant.
Risks You Should Understand
Your money is committed for the full term. DST shares can't be redeemed, and there is no real market for selling them early. You should expect to hold until the trust ends.
The trust can't change course. A DST can't refinance, raise more money or change its lease once it's set up. In a serious shortfall, it can convert into a different kind of entity to regain flexibility — but doing so permanently ends its eligibility for 1031 treatment.
Hotel income can fall. Your distributions depend on the operator paying base rent and on the hotel's performance above it.
The move into a fund is permanent. Once your share becomes OP units, you can't use it in another 1031 exchange. The REIT is private and focused on hotels only, and its withdrawals are limited and can be paused.
You could lose money. No distribution or tax outcome is guaranteed.
DST interests are securities, offered only to verified accredited investors through a FINRA-registered managing broker-dealer and only by means of a private placement memorandum, which sets out the full terms, fees and risks. Nothing on this page is an offer to sell or a solicitation of an offer to buy. This is not tax advice.
We've Owned and Run Hotels Ourselves.
115
Hotels developed & owned
10,141 rooms over three decades.
81
Owned & operated today
8,514 rooms, flying Marriott, Hilton, IHG and Hyatt flags.
75
Hotels sold
Successfully exited to date.
*These hotels are developed and owned by members of RREI's Board and their partners, through partnerships outside RREI. They are not owned by RREI or by any RREI fund or program, and investors in RREI offerings do not acquire any interest in them. Past performance does not guarantee future results.
Members of our Board have developed, owned and operated hotels under Marriott, Hilton, IHG and Hyatt flags for three decades. Our CEO, Dilip Petigara, led a private debt platform to $2.4 billion in hotel and commercial real estate loans over a career of more than $5 billion in originations, working closely with the major hotel brands. We come to hotel owners as people who have financed, owned and operated hotels, and who understand the decision from their side of the table.
Hospitality Questions
Not necessarily. Continuing to manage the hotel is a possibility we discuss with you at the start; if you do, your company leases the hotel back from the trust as master tenant.
No. All of the trust's shares are sold to investors, and your sale is complete once they're placed.
Because the price is based on an independent appraisal, shares can generally be offered at or shortly after the hotel moves into the trust.
Your exit completes as shares are placed, so any that remain unsold simply extend the timeline — they don't change the plan. You don't recognize gain on shares until they're sold.
On the trust path, we focus on newer hotels and plan a hold of about five years, designed to finish before the brand's next required renovation. The master tenant, which owns the furniture and equipment, keeps setting aside the usual reserve from operations.
On the trust path, two things: an arrangement between the trust and the operating company that starts to look like a partnership, or a master tenant with no genuine business of its own. The master lease is written to avoid both.
General information only, not tax or legal advice. How this would apply to you depends on your own circumstances and on the final documents. Please consult your own accountant and attorney.