An urban bathhouse paying homage to history and community.
Built in 1894, the Sutro Baths was a large-scale communal bathhouse where family and friends gathered to enjoy the natural healing waters of the Pacific Ocean. Over time it became a symbol of the burgeoning San Francisco metropolis with various events and exhibitions.
Inspired by the same spirit, we’re planning to restore and transform a historic building listed as a contributor in the Lower Nob Hill Apartment and Hotel National Register Historic District. Our design pays homage to the original Sutro Baths, with balconies overlooking different baths surrounded by plants, art and spaces for relaxation and social events.
Called Alchemy Springs, our project is a hydrothermal spa & bathhouse inspired by biophilic design which “brings the outdoors, indoors.” Designed by architect Olle Lundberg, our modern urban oasis promises to take you on a journey of the senses along winding ‘riverbaths’ and lush surroundings. You’ll be able to experience natures’ elements - from blazing steam saunas and frigid cold plunges, to a starscape moon bath and outdoor sun bath. Or you can step outside to enjoy a refreshing elixir in our greenhouse or gardens.
Our flagship project is planned for 939 Post Street, San Francisco, an historic, 15,000 square foot masonry timber warehouse filled with natural light and built in 1919. The property includes a 2,500 square foot rear parking lot which we plan to convert to a greenhouse, zen garden and outdoor dining terrace.
We’re tackling the project in three phases.
Pre-Phase I is underway, and covers activities during the first three months of the lease which began on August 16, 2021. During this phase we plan to begin design and engineering, fund the lease security deposit, pay legal fees and marketing fees (to announce the project) along with some other miscellaneous items.
Phase 1 is the pre-construction and design phase, which will culminate with the delivery of a “shovel ready” project. During this phase, over an 18-month period, we’re planning to complete all architectural, engineering, legal and permitting work. At the end of Phase 1, we expect to have finalized all construction documents and have obtained a fixed price construction contract and all necessary entitlements and building permits to allow construction to proceed.
Phase 2 is the construction and start-up phase. We expect to raise an additional $20.7 million in a second funding round to capitalize construction and open doors. Funding is planned to cover start-up costs including a six-month reserve of operating expenses in order to ramp up activities.
See “About the Finances” for further detail on the financing of these three phases.
We’ve signed a ten-year lease with two ten-year options that will allow us to occupy the building for a total of 30 years. We also secured an option to purchase the property within the first five years, as well a rent abatement during the first two years of the lease, from $25,000 per month down to $5,000 per month. (The landlord is accruing $20K in equity each month in lieu of receiving the full $25K in rent).
The property is located in the up-and-coming “TenderNob” neighborhood of San Francisco, located between lower Nob Hill and the Upper Tenderloin. The property is accessible from multiple high-frequency bus lines, including the new Van Ness Rapid Transit line which will start service in 2022. Customers who are driving can use two public parking garages located within two-and-a-half blocks of the site. Union Square is just 0.66 miles by foot, and the BART/MUNI Metro subway system is located just 0.4 miles away. (The Muni Metro is the City and County of San Francisco's subway system. BART is a fixed rail commuter system that serves the greater San Francisco Bay Area.)
The property is close to many tourist attractions including the main hotel district of Union Square and the thousands of Airbnb listings. There are plenty of corporate housing operators nearby including Zeus Living, Hello Landing and Blueground. Lower Pacific Heights neighborhood is nearby as is the popular Upper Fillmore District.
Alchemy Springs is targeted to open in the fall of 2024 and will be designed by award-winning architect Olle Lundberg of Lundberg Design, who is also an investor in the project.
Anne Nickel Cannady is the CEO of Alchemy Springs and leads the project and the team. Anne has over 20 years in brand strategy, culture, innovation and immersive experience design with start-ups and leading brands such as Starbucks, Avalon Bay, Choice Hotels, Royal Caribbean, Honda and PayPal. Formerly she was Head of Culture at PayPal, and Head of Employee Experience at Fastly. She’s passionate about designing exceptional end-to-end experiences and creating company culture where employees give their best to customers, everyday. Anne will be leading the marketing and partner strategy for Alchemy Springs, designing the end-to-end customer experience in line with the brand, and ensuring we have the strategy and culture to deliver it.
Olle Lundberg is both an investor and the principal architect for Alchemy Springs. Olle is an award winning San Francisco architect having lead projects which include The Slanted Door, Mourad, Twitter’s HQ and Hard Water. His role as lead design principal will be to transform this historic space into a truly-unique natural urban oasis – a perfect match for his renowned work in natural modernism, sustainability and custom fabrication.
Jon Stein will oversee the design and management of our individual and corporate membership programs, brand partnerships and community platforms. Working across the Summit Series organization for over a decade, Jon’s roles have ranged from managing Summit's Community Team, to building community-focused systems & technology, to supporting the purchase of Summit Powder Mountain, to designing environments that foster deeper meaning, group learning, and authentic connection. When not working, Jon's passion is finding new bathhouses to visit. To date he's visited over 50 bathhouses and bathing establishments globally.
Kimberly DiVico currently runs MoonAcre Spa at the Calistoga Motor Lodge and before that she was Spa Operations Manager for Auberge du Soleil, a Forbes Five Star luxury resort in Napa. She was responsible for all areas of the spa, including operations, financials, marketing, retail sales, guest service, hiring personnel, and developing training programs. She received a ‘Manager of the Year’ award, and consistently exceeded annual budget goals. Her extensive experience in sales, commitment to wellness and lifelong passion for customer service, makes her a well-balanced leader and an ideal operator for Alchemy.
Sean Manchester is an accomplished entrepreneur and executive with over 20 years of progressive leadership in hospitality and entertainment. He has held executive positions in some of the top hospitality organizations in the nation, including the Morgans Hotel Group and Ian Schrager Hotels. Sean co-founded Thirtyone Madison - the group behind such San Francisco institutions as WISH bar & lounge, Chambers eat + Drink, MIGHTY, MERCER, and he is also a partner in the Phoenix Hotel.
Other project partners include:
Michael Yarne, Development Advisor. Yarne brings 19 years experience in San Francisco real estate development, land use and real estate law, public policy and entrepreneurship to the team. As a partner at San Francisco-based BUILD Inc, Yarne oversaw a team of project managers and collectively developed over 2,000 units of multifamily housing. He has served as a senior advisor to two San Francisco mayors, including former Mayor Newsom. Most recently, Yarne was the cofounder of a venture-backed construction technology firm.
Rodney Fong, Advisor, President SF Chamber of Commerce, SF Planning Commission | SF Travel
Alchemy is an ancient science that has been practiced throughout history by many cultures. Its original intention was to purify, transform and perfect certain objects, but later it evolved into a spiritual practice of transmutation of body, mind and spirit. Alchemy Springs’ core brand is inspired by this ancient practice - our bathing amenities will incorporate the ancient alchemic elements of water, fire, air and earth to focus on the rebalancing of the inner soul. It’s a modern twist on an ancient tradition, and it fits well with the modern-day revival of bathing - a tradition practiced for centuries around the world.
Spa programming is planned to include:
- Treatment rooms for massage and skincare
- Private reserved lounge for rest and small events
- Elixir Lounge & Café serving healthy grab-and-go, snacks and refreshments
- A retail boutique to purchase spa products and other small gifts
- Special Events such as soundbaths and guided meditation in the gardens
We’re planning for a maximum bath capacity of 150 people and to be open for 12-hours a day, 7 days a week and 51.5 weeks per year. The baths plus the eight planned treatment rooms are expected to drive an estimated 180 - 220 customers to the bathhouse each day. Income will be generated through diverse revenue streams in the programmed spaces, which allow for membership, day passes, spa treatments and massages, private events and workshops.
We are projecting annual gross revenues of $12 million with $6 million + in net operating income from these activities.
Hydrothermal spas are a high-margin business model. Unlike other 1-1 treatment-based spas with high staff to customer ratios, there’s relatively low staffing in a bathhouse - a few pool and locker room attendants, maintenance and reception staff, and these numbers don’t scale much as traffic increases.
Bathing is undergoing a modern-day revival. The ancient ritual of ‘bathing’ has been practiced for centuries in cultures around the world. Across the country the established, classic Turkish, Korean and Russian bathhouses have entered the mainstream. In addition, new trendy bathhouses are popping up in major cities across the United States and quickly expanding their footprints.
In 2019, The Global Wellness Institute (GWI) reported that co-ed thermal bathing was gaining traction in the United States as younger generations sought out group wellness activities. In the same year, GWI launched an initiative declaring June 22, ‘World Bathing Day’ globally. This trend is also mirrored on social media networks. According to Pinterest's 2019 trend report, searches for hot springs have soared by 32 percent. Some statistics worth noting include:
Digital detox. $150 million market and growing.
Self-care. $450 billion market.
US Spa Industry. Over $18.3 billion in 2019 breaking nine consecutive record years, and continues to experience steady growth with increases in overall revenue, locations, number of spa visits, and revenue per visit.
Day Spa/Hydrothermal Spa Vertical. A fast-growing segment in the US. According to the Global Wellness Institute (GWI), the $56.2 billion thermal/mineral springs industry comprises 34,057 thermal/mineral springs establishments operating in 127 countries. 25% or so are higher-end establishments aimed at tourists and offering value-added spa services. These more modern facilities account for 66% of overall industry revenues – the lion’s share – and are enjoying revenue growth of 7.4% annually.
US Wellness Tourism. $241.7 billion market in 2018 with projected expenditure of $311.3 billion by 2022, 5.2% projected annual growth rate.
San Francisco Travel. 26.2 million people visited the city in 2019, breaking records for 10 consecutive years, with San Francisco visitors spending $10.2 billion, up 2.7% over 2019.
Our competitors include San Francisco hotels, day spas, and bathhouses. The most frequented bathhouses and spaces include Kabuki Springs, Archimedes Banya, Onsen and Pearl Korean Spa (women only). The most frequented hotel spas include Nob Hill Spa, Remede @ St. Regis, Four Seasons and Vitale.
- Community-owned. Shared ownership and shared social bathing experience.
- Holistic approach. Scale and breadth of hydrothermal and spa amenities.
- Inspired by nature. Biophilic design.
- Equity in hand. $750,000 previously raised.
- Site secured. 30-year lease has been signed.
- Convenient location. In central San Francisco.
- Historic renovation. 16,000 s.f. historic building + outdoor space.
- Experienced operators. Experienced, 4-star spa operators.
We’re planning a six month PR campaign leading up to our opening, in order to pre-sell memberships, ‘early access’ experiences, and launch events.
We'll offer local and corporate memberships, as well as walk-in day passes for tourists and non-members. There’s also a small private event space for hire on the massage treatment level with private lounges, perfect for Birthday or Bachelorette parties, custom workshops and or team retreats.
Our go-to-market strategy is to build a strong loyal local community through premium membership features and discounts with local partners and local events series. Our Community and Membership Director has relevant experience having run the Summit Series and their community as well.
For tourists, we'll establish formal and informal Hotel and Tourism partnerships with the help of our partner and advisor, Rodney Fong. Rodney is currently the president of the San Francisco Chamber of Commerce, past head of San Francisco Travel and has also served on the San Francisco Planning Commission. As a result, he has cultivated deep relationships in the city.
About our competitors:
The Company is engaged in two simultaneous offerings of its securities: An offering under Regulation CF (where anyone can invest), which we refer to as the “Reg CF Offering” and an offering under SEC Rule 506(c) (where only “accredited Investors” can invest), which we refer to as the “Reg D Offering.”
We plan to use the proceeds of the two offerings to get the Project, Alchemy Springs, to “shovel ready” status: fully approved plans, permits and fixed-price construction contract.
We are trying to raise a maximum of $1,000,000 through the Reg CF offering but we will move forward with the Project and use investor funds if we are able to raise at least $250,000 (the “Target Amount”). If we have not raised at least the Target Amount by December 20th 2021 (the “Target Date”), we will terminate the Offering and return 100% of their money to anyone who has subscribed.
We are trying to raise an additional $2,000,000 through the Reg D Offering. We will move forward with the Project and use investor funds if we are able to raise at least $2,500,000 through either offering or both offerings combined. If we have not raised at least this minimum goal by December 20th 2021, we may terminate the Reg D offering and return 100% of their money to anyone who has subscribed.
The minimum you can invest in the Reg CF Offering is $250. Investments above $250 may be made in $250 increments (e.g., $500 or $1,000, but not $736). An investor may cancel his or her commitment up until 11:59 pm on December 18th 2021 (i.e., two days before the Target Date). If we have raised at least the Target Amount we might decide to accept the funds and admit investors to the Company before the Target Date; in that case we will notify you and give you the right to cancel.
The minimum you can invest in the Reg D Offering is $15,000. Investments above $15,000 may be made in $5,000 increments (e.g., $20,000 or $25,000, but not $16,500). If we have raised at least the minimum goal of $1,500,000 we might decide to accept the funds and admit investors to the Company before the Target Date.
After we accept the funds and admit investors to the Company, whether on the Target Date or before, we will continue the Offering until we have raised the maximum amount.
You can review the offering disclosure (both Form C and the amended Form C) registered on the SEC website here, or download the amended Form C here.
Investments under Reg CF are offered by NSSC Funding Portal, LLC, a licensed funding portal and investments under Reg D are offered by NSSC Crowd LLC.
Total acquisition and development costs are estimated to be just approximately $24.1 million.
No bank loans are planned for the development period, although if we identify a Phase 2 investor who is willing to offer a guarantee, we may avail ourselves of a construction loan to reduce the total amount of equity needed for the project. Equity will be raised in two tranches, Phase 1 (the Seed Round) and Phase 2 (Construction and 6 months operating expenses).
Phase 1 (which includes “Pre-Phase 1” activities) will require $3,387,109. Approximately $750,000 of the Phase 1 budget has been funded through a combination of the Manager’s prior cash investment in addition to several key consultants converting their fees to equity, which leaves a $2.7M gap to be funded by this side-by-side offering.
Phase 2 will require an additional $20.7 million in funds, of which $480,000 will be rent converted to equity. Accordingly, we plan to raise the remaining $20.2 million through a second Phase 2 equity offering sometime in late 2022/early 2023.
The expected valuation of the final project when complete will be $26.4 million, which includes the total project cost plus the addition of $2.3 million of Sponsor Shares to the capital stack. This represents 8.72% of the total value and is designed to provide the Manager with the equivalent of “sweat equity.”
A budget summary and Detailed project data can be downloaded here.
The Company plans on selling or refinancing the project in year seven. You can review more detail on the operating budget here. Upon stabilization, at the end of year seven, we anticipate that the project will generate $6 million in annual profit.
Once construction is complete and final project costs are confirmed, Phase I investors (investors in this offering) are expected to receive non-promoted profits equivalent to their final percentage ownership of total company shares (based on final project costs) on a quarterly basis. For example, a Phase 1 investor of $202,000 would receive 1% of project profits ($241,000 is 1% of a final $24.1 million project cost). Or a Phase 1 investor of $24,100 would receive 0.1% of project profits.
A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment.
In making an investment decision, Investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document.
The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.
These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.
There are numerous risks to consider when making an investment such as this one and financial projections are just that - projections. Returns are not guaranteed. Conditions that may affect your investment include unforeseen construction costs, changes in market conditions, and potential disasters that are not covered by insurance. Pleae review this Risks of Investing document for a more expansive list of potential risks associated with an investment in this Company.
Unless otherwise noted, the images on the offering page are used to convey the personality of the neighborhood in which the project is planned. Properties shown in these images are not included in the offering and Investors will not receive an interest in any of them.
Covid 19 Disclosure
According to a report prepared by PriceWaterhouseCoopers for the International Spa Association, by the end of 2020 the Spa industry had experienced a US$7 billion drop in total revenue, decreasing from US$19.1 billion at year’s end in 2019 to US$12.1 billion (an overall 36.4 percent decrease).
Spa visits fell from 192 million in 2019 to 124 million in 2020, while average revenue per visit shifted from US$99.5 to US$97.5. In addition, as of December 2020, 21,560 spa businesses were recorded* compared to 22,430 in December 2019.
As we write this, the spa market is already showing signs of a return to pre-pandemic activity. Encouragingly, the PriceWaterhouseCoopers study showed that, as of January 2021, roughly 305,000 spa employees had returned to US spas, compared to 384,000 spa employees recorded in January 2020. This represents only a 20.6 per cent drop. Again, data showed that day spas fared better in these metrics, as one in two resort/hotel spas (51 per cent) reported a greater than 25 per cent decrease in staff, compared to one in five.
The total development timeline of Alchemy Springs, from pre-construction and design activities through construction to opening day, is estimated to be three years. By then some analysts believe we’ll be closer to or at herd immunity suggesting a pathway back to normal life.
A growing body of research suggests that hydrothermal therapies can be beneficial for mitigating the effects of Covid. For example, a position paper prepared by Professor Marc Cohen for the Global Wellness Institute Hot Springs and Hydrothermal Initiatives in May 2020 (Hydro-Thermal Therapies are Essential for Building Health, Safety and Resilience in the Age of Pandemic), discusses how spa revenue might be impacted if we are hit with another wave/variant of the coronavirus.
We also believe that hospitality business models which maintain diverse revenue streams, like Alchemy Springs, are positioned to adapt to changes in market demand, and this will be paramount to our success. Should we enter a new pandemic, or if the current Covid-19 pandemic continues to linger when Alchemy Springs is ready to open for business, we would explore options to generate revenue through on-line amenities such as retail, food and beverage, 1-1 massage appointments, or small group offerings limited to gathering size restrictions. We would also explore opening our outdoor pools and garden prior to opening indoor amenities.