MCR Picks Up Palm Springs Hotel at Auction

Hotel operator MCR has acquired a Staybridge Suites Cathedral City Palm Springs at a foreclosure auction. With the acquisition, MCR has expanded into the California market, owning 110 properties in 33 states.

Staybridge Suites Cathedral City Palm Springs is a 197-room property in the Coachella Valley, near the Palm Springs Airport and Downtown Palm Springs. The extended-stay property has in-room kitchenettes with a full-sized refrigerator, microwave, two-burner stovetop and dishwasher, and the onsite amenities include a fitness center.

The auction is an early example of the distress in the hotel sector, which was triggered by the pandemic. There is likely more distress to come in the second half of the year. Last month, a CMBS special servicer retained JLL’s hotels and hospitality team retained for the sale of an $80 million, non-performing loan portfolio that includes six loans collateralized by full limited-service hotels totaling 1,022 keys across five states. The portfolio includes two full-service and four limited-service hotels located in Lexington, Kentucky, Springfield, Virginia, King of Prussia, Pennsylvania, Indianapolis and Portage, Indiana, and West Coxsackie, New York. Like Staybridge Suites Cathedral City Palm Springs, the transaction was considered an early example of emerging investment opportunities in the hotel space.

There are signs that many hotel properties will be saved from the brink of default. Lenders aren’t in a rush to take back hotel assets, according to Bob Webster, vice chairman and president, CBRE Hotels Institutional Group in an interview with GlobeSt.com. Many capital sources are stepping in to infuse financial resources into distressed properties. Ample liquidity for hotel properties is propping up prices. Webster says that hotel values are within 20% of  2019 values, and top-tier hotels that were doing well in 2019 and had little distress in the capital structure are still durable assets.

While hotel transactions have declined overall compared to 2019, some property types are weathering the storm. Real Capital Analytics research shows that transaction volume in the sector fell by more than two-thirds compared with 2019, which was the lowest level since 2009. Sales for economy branded hotels fell only 22%. The only CRE sector to perform better was industrial.

Economy-branded hotels have also grew their market share last year. Investment in these hotels made up an average of 5% of the market between 2015 and 2019. RCA says that number climbed to 16% in 2020. Also, 30% percent of total hotel investment went to midscale hotels.