Investment Segregation

Balancing investment. Reducing risk. Optimising Return.

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Real Estate Securities (MRES)

Real Estate Investments in hotel and resort properties via long term first mortgage loans and medium term mezzanine debt in the company holding the real estate asset. Capital repayment is securitized by lease revenues of underlying real estate. Long and medium term stable ROI.


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Operator Securities (MOPS)

Working Capital Investments in hotel management operations via short term straight loans in the company operating the hotel activities. Short term higher ROI.

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Hotel and Resorts

MRE separates the resort real estate investment from hotel property investment through MRRE and MHRE. Each property is structured in a Special Purpose Vehicle (SPV) or as segregated compartment.

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Operational segregation

MOP distinguish resort from hotel operations.

 
Real Estate Market Cycle

Commercial Real Estate Market Cycle

The overall strategy of MHI is founded on the cyclicality of the real estate marketplace. The Commercial Real Estate Market Cycle (CREM) will continually be analyzed to determine the ideal time for buying, selling, or holding assets. 

The four stages of the CREM include recovery, expansion, hyper supply, and recession. The most recent cyclical downtown (hyper supply and recession) in the hospitality industry has subsequently created appealing purchasing opportunities. 

 
Real Estate Market Cycle

Opportunity is everywhere

These opportunities have been created by any of the following: purchasing power scarcity, distressed situations created by mismanagement and lack of expertise on the part of sellers, or distressed situations created by capital constraints. 

MHI intends to capitalize on these attractive purchase opportunities by executing a strategy of a four step process through the acquisition, renovation, acceleration, and harvest of a hotel asset.

Investment Strategy

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Acquire

Acquire hotel assets at a discount to new development or replacement costs to capitalize on the appealing purchase opportunities. MHI will target acquisition opportunities mostly lying in secondary, and some tertiary, geographic markets which been identified as containing profitable and thriving assets for investment. These secondary markets avoid the cautionary characteristics of gateway cities that are already saturated with hotel assets, investors, and developers which is only expected to increase as market economics improve. Acquisition opportunities will focus on target assets that fall in the hotel chain scales ranging from Economy over Midscale to Upscale. These segments have been identified as available for acquisition, high growth potential, and consumer willing to pay. 
In addition, MHI has identified these segments of hotel scales as containing attractive industry characteristics in operational procedures and improvements, are attractive to the shifting consumer preferences, and financial benefits aligning with the MHI strategy. Targeted acquisitions, within identified geographic locations and hotel scales, have a guideline of characteristics to meet MHI’s targeted returns.

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Renovate

Renovate customer areas that directly impact the total customer stay experience.  The MHI strategy calls for an acquisition to undergo property and operational improvement executed as detailed by the respective flag(s) in order to maintain actual flag standards. 
Additionally, ‘soft’ customer facing renovation decisions will be made by the operational management with the purpose of increasing capabilities in key areas of property performance (i.e. increase consumer willingness to pay). 
In addition to renovations, the MHI strategy will target the improvement of the hotel acquisition its operational and managerial inefficiencies. These inefficiencies will be identified and improved by comparing the performance of the hotel against the extensive knowledge and portfolio of the MHI’s strategic partners i.e. international hotel groups who’s management have had exceptional success in post takeover property enhancement. 

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Accelerate

Accelerate each hotel’s income statement results via capturing higher room and occupancy rates due to adding a flag, improve facilitates and macroeconomic trends, and continually improving expense productivity via leveraging operator’s best-in-class capabilities. MHI will utilize proprietary financial knowledge as well as its established relationships with its hotel management companies to maximize property efficiency according to key performance barometers.  These metrics will be continually evaluated to continue improvement. To achieve that, MHI will enter long term (long) lease agreements (min 20 years) generating a fixed base income to cover debt service and a base return and variable revenue based lease income to generate a higher than market return. 
Furthermore, MHI will analyze the supply and demand of the hotel properties local market centered on three main consumer travel groups and generational preferences. Through the identification of local market revenue drivers the property can efficiently target the best revenue enhancing consumer opportunities to improve performance. Adding the right flag on the property for a specific market will increase demand, generate an improved consumer experience resulting in higher ADR and OCC.

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Harvest

Harvest or exit, via sale or significant recapitalization, hotel assets at forecasted attractively higher market valuations due to improved operating profitability or market-based timing of the Commercial Real Estate Market cycle. After the appropriately determined holding period (based on the CREM cycle), where profitability has been stabilized, MHI may explore exit or refinancing options that would be intended to produce lucrative equity returns for security investors. The assets may be sold on an individual basis or as a portfolio, dependent on market conditions and interest.