The hotel industry is in the second to third inning of recovery, an opportune time for MCR Development to make acquisitions, we learned. That includes last week's $430M portfolio sweep of 26 hotels throughout Texas, Arizona, South Carolina, and Montana (including the Residence Inn in Abeline, Texas above). "We still have a good four to five years ahead of us," says VP of acquisitions and development Russ Shattan, who along with CEO Tyler Morse has been seeking out assets—mostly recent vintage, extended-stay hotels in secondary markets, which offer higher returns. In fact, 19 of the 26 Marriott and Hilton Hotels it purchased from Western International were extended-stay; the portfolio totals 3,002 rooms, and assets average four years old. And it's ready to pull the trigger on more deals, Russ says. While most of its competition has refocused their sights on primary downtown markets, MCR will continue to look in the suburbs and other secondary areas, he says (that's where you get all that sweet youth travel soccer tournament business). The West Coast, Pacific Northwest, Texas, and Florida are particularly attractive.
MCR was launched in 2005 and built six properties from the ground up, but shifted to purchasing open and operating hotels in 2010. (Above is the Residence Inn in Bozeman, Mon. that was part of last week's buy.) "We found that there was a lot of distress and owners in situations where they needed to sell," Russ says. Last week's deal is reminiscent of its first portfolio play, buying 10 select-service and extended-stay Marriotts and Hiltons in New Jersey, Connecticut, and Pennsylvania for $164M; it's since expanded its portfolio (now totaling 56 hotels) to Florida, NYC, and the Baltimore metro. MCR operates all of the hotels it owns, and Russ says the newest portfolio will bring further upside through operations improvements. When Russ visits different markets, he likes to explore the urban area by bike—he and his wife (who works for Starwood) recently spent a weekend cycling through Baltimore and its suburbs and found it to be "a surprising, fantastic city."
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