NEW YORK — While there have been significant barriers to hotel transactions in recent years, Mission Hill Hospitality has managed to grow its portfolio from one to 33 hotels in just over three years.
Chief Financial Officer Tom Barber, who joined the company in late 2023, said the KSL Capital Partners-owned firm hopes to remain "one of the faster-growing select-service platforms in the business" this year as the deals market opens up.
"We think given our acquisition criteria in terms of good vintage, high barriers to entry, ... we will outperform the market," he said. "We're pretty optimistic about the balance of the year."
Mike Wilbert, senior managing director and head of acquisitions for Mission Hill, said he remains "optimistic that there should be an uptick in transactions in the second half of the year," in large part because of more clarity on the trajectory of interest rates.
"And also further pressures from lenders on current owners for capital plans and reinvesting in the properties," he said. "A lot of cycle renovations or maintenance has been deferred for the past few years. That's another driver of sell decisions."
Barber also said the wave of debt maturities in the hotel industry and more broadly across all commercial real estate is likely to spur more deals.
"There's really no stress in our portfolio, but that's going to be a catalyst for acquisitions," he said.
Barber noted most of Mission Hill's portfolio skews toward leisure-driven markets, which have shown some "green shoots" this year compared to recent underperformance. He said he expects that will remain the case, as leisure resorts have long been the comfort zone for KSL and its operating platform KSL Resorts.
The two firms now share a chief executive in Greg Kennealey, who lead Mission Hill since its founding and was appointed KSL Resorts' CEO in April.
But Wilbert noted Mission Hill has expanded its horizons, at least somewhat. While the company continues to invest primarily in select-service and extended-stay hotels, executives also will look to "expand our investment critical to look at boutique resorts or comparable full-service lifestyle products."
Barber and Wilbert said the company isn't only focused on leisure, and is willing to invest in markets with stable demand drivers, whether that be from government, education or medical.
Even now, they're seeing more activity in the $20 million to $40 million range, with Wilbert noting there's more availability for financing with those types of deals.
Wilbert said Mission Hill has seen success in acquiring both newly constructed hotels along with older properties that require brand-mandated property improvements and more demanding brand conversions.
"All three have worked out so far," he said. "There's pros and cons to each, except the brand-new one. That's straightforward. But we'll continue to look at heavier value-add reposition programs going forward because that's where we believe we can exercise in-house expertise."
More of the properties requiring brand property-improvement plans could be hitting the market in the latter half of the year, he said, as brands are "becoming less flexible on waivers."
"That's something everybody's dealing with across the board," Wilbert said.
Barber said Mission Hill's preference is often a brand conversion of a life-cycle property-improvement plan because it gives them more say in how to position the asset.
"You'd like to have more control over the reposition because you're going to address physical product that's going to be additive to your performance," he said. "Whereas if it is a mandated seven-year refresher, it may or may not make sense for that particular asset."