MCR closes first fund, aims to spend $1 billion buying U.S. hotels

NEW YORK (Reuters) - MCR, a large U.S. hotelier, has closed a fund with an estimated $1 billion in purchasing power with plans to acquire around 50 to 55 Marriott- and Hilton-branded hotels, the firm said on Friday.

The MCR Hospitality Fund LP, the firm’s first fund, has capital commitments of about $300 million and is on track to acquire 25 hotels by year’s end, the company said.

Eleven hotels with 1,272 rooms already have been acquired for about $160 million and five hotels with 550 rooms are in the pipeline in deals expected to close by August, it said.

MCR buys select service hotels, which offer limited services, from non-institutional investors who do not fully understand the hospitality business, Tyler Morse, chief executive of New York-based MCR, said in an interview.

“This is a sharpshooter approach to the fund. We’re doing one thing over and over and over again, and we’re doing it really well,” said Morse, a former Morgan Stanley investment banker and assistant to property mogul Barry Sternlicht.

“We know where the bodies are buried, we know what works, what doesn’t work,” he said about the firm’s more than 100 acquisitions over the past 12 years.

The United States has about 55,000 hotels and MCR would be happy to own 8,000 of them, about 400 of which go on the market any given year, Morse said.

The fund will take on about $700 million in debt, taking on individual loans for every transaction, he said.

MCR has returned about 18 to 20 percent in the past, when leverage from loans is included, Morse told Reuters.

The 11 deals were done at an average purchase price of almost $126,000 per room, which is 20 percent below their replacement cost, the company said.

MCR says it is the seventh-largest U.S. hotel owner and operator. The fund’s investors include endowments, foundations, charitable trusts, high net worth individuals and principals of MCR, the company said.

Reporting by Herbert Lash; Editing by Phil Berlowitz