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Friday, 01 June 2018

MCR Raises $300Mln Fund to Invest in Select-Service, Extended-Stay Hotels

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Commercial Real Estate Direct Staff Report

MCR Development, which has accumulated a portfolio of 94 hotels with 11,200 rooms in 24 states, has raised its first fund, MCR Hospitality Fund LP, with $300 million of equity commitments.

With leverage, the fund would have the capacity to make roughly $1 billion of investments by the end of next year. It would pursue Marriott- and Hilton-branded select-service and extended-stay hotels in secondary markets.

MCR already has invested $62 million of the fund's equity. It paid a total of $160 million for 11 hotels with 1,272 rooms in Chicago, Salt Lake City, Cincinnati, Milwaukee, Richmond, Va., Providence, R.I., Champaign, Ill., and Allentown, Pa.

The properties consist of four Marriott hotels with 496 rooms and seven Hiltons with 776 rooms. The company said the average price it paid - $126,000/room - is 20 percent below the properties' replacement costs.

MCR is led by chief executive Tyler Morse, who co-founded the company in 2006. The company is known as a developer, but also has been buying existing properties. Initially, it found success buying portfolios from non-institutional investors, but more recently it has found greater opportunities buying properties one or two at a time.

Instead of raising capital for each investment individually, it decided a fund would provide it with greater flexibility. The vehicle is capitalized by endowments, foundations, charitable trusts, high net-worth individuals and MCR executives.

"To deploy equity capital and repeatedly raise money on a deal-by-deal basis is challenging," said Russ Shattan, MCR's senior vice president of acquisitions and development. "The fund is a more programmatic approach."

Besides the 11 hotels that it has already bought through the fund, MCR has five other properties with 550 rooms under contract. It expects those deals to close by the end of August.

It also anticipates buying nine more properties by the end of the year and 25 next year, which would give it a total of 50 hotels.

MCR focuses on hotels with about 100 rooms in secondary markets, such as Cincinnati, Milwaukee, Richmond and Salt Lake City, that are attractive to business travelers and people going on vacations. It typically obtains mortgages from banks for about 65 percent of hotels' values. MCR manages its own properties and typically sells the hotels after five years.

Comments? E-mail Tim Casey or call him at (267) 397-3347.



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Additional Info

  • Syndicate to Realpoint: No
  • Sector: Hotel & Resort
  • Subject: Institutional Investment (INS), Opportunity Funds (OPPY)
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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