Date: October 2018
Location: HQ Germantown, Tennessee, USA
Name: McNeill Hotel Company
No. of Keys:
Owner: McNeill Hotel Company, an owner, developer and manager of hotel properties in the USA, is going double or nothing. The company has big plans for expansion into secondary and tertiary markets within the U.S., and thanks to a $150-million deal with Almanac Realty Investors, the real estate investment arm of Rothschild North America, McNeill’s options are open.
Mark Ricketts, president and CEO of McNeill, said the company began looking for investors in early 2017. The company had worked with Almanac previously, and began talks with the company last October regarding potential investment. Ricketts said Almanac was an attractive partner because the company has previous experience investing in the lodging industry, and McNeill’s existing platform of 18 hotels resonated with Almanac.
McNeill’s strategy is clearly mindful of a potential downturn. Ricketts volunteered that university markets such as Morgantown, W.Va., and Waco, Texas, have consistent, predictable demand trends that don’t fluctuate wildly even when the economy suffers, and as uncertainty increases heading into 2019 it pays to pick a safe bet.
“I don’t know if institutional investors know how to underwrite these markets, but they may not appreciate the demand drivers as much as we do,” Chris Ropko, CFO said. “New supply is more pressing, since it creates potential competition for assets we are targeting, but institutional capital drives yields down, making it a little more tenuous for us.”
“Another issue is the quality of flags available in some markets,” Ricketts said. “We’re staying with branded hotels, that’s our strength and we are a proponent of the brands.”
Branded or not, Ricketts pointed out that McNeill is looking for unique hotels in order to differentiate its portfolio from others. The company’s existing stable includes a Hampton Inn outside of McNeill’s home base of Germantown, Tenn., which offers generously proportioned outdoor seating options.
“We are trying to make sure our offerings are unique,” Ricketts said. “This is what the customer wants. We know people want to be outside, so we are looking at offerings that provide that, such as rooftop bars.”
For development, Ricketts said McNeill makes use of an owner advisory committee, as well as any brands attached to a project, to inform a property’s construction in order to take advantage of any unique positioning available.
“They tell us to look at certain designs, at how to incorporate guestroom design into the surrounding area,” Ricketts said. “From a development standpoint, it’s great to have that relationship.”
“Almanac invests in platforms, not specific real estate,” Ropko said. “Over the past five years we have negotiated with them a lot on several deals. They do a lot of diligence ascertaining management teams, with who they are getting in bed with, so to speak. Once they deem a platform worthy they don’t want to disrupt that. It’s not a turnaround private equity play, it’s true growth.”
Of course, time is money, and while Almanac may have invested in a platform it also invested in what will eventually become a larger hotel portfolio. Ropko said there is no firm timeline to double McNeill’s portfolio, but the venture with Almanac has an investment window of 36 months. Time enough to be picky, but not too picky.
THPT Comment: Great to see the ambition Mark Ricketts has for McNeill. New departure for Almanac…into hotels?
First Seen: Hotel Management