Overview
An all-cash, debt-free hospitality DST owning the 182-room Residence Inn by Marriott Houston Medical Center, a 16-story interior-corridor select-service / extended-stay hotel at 7807 Kirby Drive, Houston, Texas, in the Medical Center / NRG Stadium submarket anchored by the Texas Medical Center, the world's largest medical complex. The Trust acquired the Project on February 27, 2026 from an affiliated seller (Moody National Kirby-Houston Holding) for $33,000,000, approximately 6.3% below the $35,200,000 as-is appraised value (and below the $39,400,000 prospective value upon completion of a brand-mandated Property Improvement Plan). The Trust raised $41,905,000 of equity with no financing; proceeds funded the acquisition, $3,620,782 of operating and capital reserves (including roughly $3.2 million reserved for the Marriott PIP), and offering costs. The hotel is operated under a master lease with an affiliated Master Tenant (Moody Med Center 2 MT, LLC), which contracted Moody National Management, L.P. as Property Manager; rent comprises Base Rent plus Percentage Rent equal to 70% of gross revenue above a baseline of $6,200,000 growing 3% annually. Distributions to Holders are projected to begin at 6.0% of invested equity and increase to 6.8% over the approximately 10-year hold. The Med Center submarket posted strong post-pandemic RevPAR growth (21.8% in 2022, 13.6% in 2023, 10.2% in 2024) with only 71 rooms added in 2025 and none currently under construction. Sponsored by Moody National, a Houston-based real estate firm; the Managing Broker-Dealer is a Moody affiliate. Beginning two years after the offering closes, Holders may elect to contribute their interests to an affiliate Exchange Entity for units in an optional Section 721 transaction (receiving cash unless they elect units); the Project is expected to be sold in approximately 10 years.
Highlights
The hotel's demand anchor is the Texas Medical Center, the world's largest medical complex (with the TMC3 research-campus expansion underway), supplemented by NRG Stadium events, producing deep, needs-based, relatively recession-resilient lodging demand from patients, families, medical staff, and researchers. New supply is constrained: the submarket added only 71 rooms in 2025 and has none currently under construction, supporting occupancy and pricing power.
The DST is all-cash and debt-free, eliminating refinancing, balloon-maturity, and interest-rate risk and removing the debt-service drag, so the entire 6.0%-to-6.8% distribution is unlevered. The structure also avoids the lender cash-management sweeps and restrictive covenants that burden the leveraged hotel and multifamily DSTs, giving the Trust Manager greater operational flexibility through hospitality cycles.
The asset was acquired at $33,000,000, roughly 6.3% below its $35,200,000 as-is appraised value and well below the $39,400,000 prospective value upon completion of the Property Improvement Plan, providing a discounted basis. It operates under the Residence Inn by Marriott extended-stay flag, which draws longer-tenured, higher-margin medical-related stays, and a roughly $3.2 million capital reserve is set aside to fund the brand-mandated PIP.
The submarket's operating trajectory is strong: RevPAR grew 21.8% in 2022, 13.6% in 2023, and 10.2% in 2024 on a combination of occupancy and average-daily-rate gains, with continued growth projected through 2029. Extended-stay product such as the Residence Inn typically delivers steadier occupancy and higher operating margins than transient full-service hotels, reinforcing income durability within the volatile lodging sector.
The offering includes an optional Section 721 / UPREIT exit: beginning two years after the offering closes, Holders may elect to contribute their interests to an affiliate Exchange Entity in exchange for units (or receive cash), providing a potential tax-deferred continuation path that is uncommon among single-asset hotel DSTs and offers an alternative to a fully taxable disposition.
Analysis
Insights
Moody Med Center 2 is an all-cash, core-plus hospitality DST whose return is an unlevered, operations-driven distribution (6.0% rising to 6.8% of equity) plus terminal value, on a single 182-room Residence Inn by Marriott in the Texas Medical Center submarket, operated through an affiliated master lease and hotel-management agreement. It is the ledger's first hotel and, like the all-cash net-lease holdings, carries no financing risk, but unlike those its cash flow is an operating hotel business with daily-repricing, economically sensitive revenue rather than contractual rent. The investment case rests on deep needs-based medical-center lodging demand, constrained new supply, strong post-pandemic RevPAR growth, a discounted basis to appraised value, and a durable extended-stay brand. On a risk-adjusted basis the absence of leverage materially de-risks the balance sheet and supports a higher unlevered yield, but is offset by hospitality's inherent volatility, single-asset, single-market, and single-flag concentration, dense Moody-affiliate conflicts across the seller, master tenant, manager, and broker-dealer, property-improvement-plan execution risk, and distribution dependence on reserves. Macro fit is favorable in that medical-anchored extended-stay lodging is among the more defensive hospitality niches and a debt-free structure suits a higher-rate environment, but RevPAR is cyclical and the exit in roughly 10 years depends on hotel pricing and Texas Medical Center demand. The optional Section 721 / UPREIT exit adds a tax-deferred continuation option. Underwriting feasibility hinges on sustaining occupancy and ADR through the hold and executing the PIP on budget; the disclosed distribution ramp is the offering's stated guidance, and the realization is a sale or 721 contribution in approximately 10 years.
Advantages
The offering pairs a needs-based, recession-resilient demand anchor (the Texas Medical Center) with constrained new hotel supply, under a strong Residence Inn by Marriott extended-stay flag, acquired at a discount to appraised value. The all-cash, debt-free structure eliminates financing, refinancing, and interest-rate risk and supports a higher unlevered distribution beginning at 6.0% and rising to 6.8% of equity, while the submarket has demonstrated robust post-pandemic RevPAR growth. The deal is led by an experienced Houston-based hospitality sponsor with local operating relationships, includes a funded reserve for the brand-mandated property improvement plan, and offers an optional Section 721 exit providing a tax-deferred continuation alternative.
Concerns
Hotel income is an operating business that reprices daily with no lease term, making cash flow far more volatile than the ledger's net-lease and multifamily holdings and directly exposed to RevPAR, occupancy, and ADR swings, recessions, group and event cancellations, and labor and insurance cost inflation. The Trust is a single asset in a single market under a single brand dependent on a single demand driver, so any disruption to the Texas Medical Center, the Residence Inn franchise, or new supply would hit cash flow immediately. The seller, Master Tenant, Property Manager, and Managing Broker-Dealer are all Moody affiliates, concentrating conflicts of interest, and the affiliated Master Tenant is newly formed with limited capital, so its ability to pay rent depends entirely on hotel operations. A Marriott-mandated property improvement plan must be funded (roughly $3.2 million reserved), introducing renovation-cost, disruption, and brand-compliance risk, and the as-is appraised value reflects pre-PIP condition. The PPM notes the Trust may need to draw on limited reserves to meet the 6.0%-to-6.8% distribution target, so an operating shortfall would reduce distributions or deplete reserves. The Houston Gulf Coast location carries hurricane and wind exposure (Wind Zone III) with no separate wind insurance anticipated, and upfront costs are high, with a 9.04% selling and sponsor load plus 2.76% of affiliate carry costs and 0.52% of franchise expenses, such that only about 78.75% of equity funds the real estate.
