"There are 13 properties under letter of intent or contract right now," Michael George, Crescent Hospitality president and CEO, tells GlobeSt.com. "We are attempting to close on 12 by the end of the year." JV partners Crescent Hospitality, Allied Capital of Washington, DC and the LCP Group in White Plains, NY, plan to spend the $1 billion in the next 12 to 18 months.
Its acquisition activities--which will include sliver equity investment--represent a new direction in strategy with the launch of the Fairfax-based Crescent Hotels & Resorts. Until now, Crescent Hospitality primarily was a manager of hotels and freestanding restaurants. George says the hotels will be managed by Crescent Hotels & Resorts. Crescent Hospitality has sold its restaurant assets in New York, New Jersey and Delaware.
George expects to announce the closing of a portfolio transaction in late third quarter or early fourth quarter. All he'll say is it's an off-market transaction. "We have an active pipeline that will carry us into 2007," he says. "We have over 50 assets in our business development pipeline that are under consideration."
George says the fund's geographic focus is the US. "We lean towards secondary and tertiary markets--from fairly substantial urban markets such as Pittsburgh, for example, to cities in the Carolinas and Louisiana," he says.
The Crescent Hotels & Resorts fund launched with the purchase of the 221-room Detroit Marriott Livonia at 17100 Laurel Park Dr. North. It was acquired from Host Hotels & Resorts in Bethesda, MD, for an undisclosed sum. George says the acquisition was part of the $200-million to $250-million pipeline. Host Hotels declined to comment on the deal.
George says the Detroit acquisition will be atypical for the fund because it's considered a market leader in the Detroit market and, most importantly, requires little capital. "That is uncharacteristic of our business strategy in that we label ourselves more as hotel doctors," he explains. "We are good at turning hotels around." He adds that the appeal was its Marriott flag. "Part of our strategy is to be a full-service operating partner with Marriott," he says.
George says the majority of assets it expects to acquire will have potential in terms of market location and brand component, but most often will be lacking in capital. Crescent plans to add value through aggressive management and potential up-branding, he says. The sliver investments it expects to make--providing equity of 10% to 20% to acquire and manage hotel properties--will focus on down market properties, in order to better diversify its portfolio.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
