May 16, 2018
George Smith Partners successfully closed a construction take-out and bridge refinance for a 213-key boutique lifestyle hotel located in the Southwest. The proceeds were used to refinance costlier construction financing, including a mezzanine facility. The loan featured an earnout of additional proceeds as well as a capital improvements budget. The hotel recently opened and thus significant operating history was not available. Additionally, the in-depth rehabilitation elevated the exterior corridor hotel to a new market segment which brought with it unique challenges.
GSP’s mandate was to source a lender who not only had the ability to execute in a timely fashion, but one who recognized the value in the excellent location and strategic positioning of the Hotel. The selected lender needed to have a deep understanding of all aspects of the deal, from a millennial-focused customer demographic, to the significant food and beverage component reflected in the Hotel’s two restaurants and secret whisky bar.
The selected lender was able to recognize the unique value proposition of the property and the strong sponsorship involved in the project.
April 4, 2018
George Smith Partners has arranged $25,200,000 (85% of project costs) of non-recourse acquisition and redevelopment financing for an un-flagged, family run, 120-Key select-service hotel in Davis, California. To date, the Property has not undergone any significant renovations since opening in the 1980’s. Despite the properties’ dated appearance, the hotels close proximity (less than half a mile) to the UC Davis campus has provided it with ample foot traffic resulting in attractive operating metrics. Over the last three years, the property has consistently produced significant positive Operating Income solidifying the Sponsor’s business plan and confirming that extensive property wide renovations would lead to significant value creation. In addition to completely renovating the Property, the Sponsor plans to re-flag the property with a high quality, nationally recognized brand.
GSP identified a capital provider who was comfortable providing fixed-rate leverage, providing a needed level of security to the client against an increasing rate environment. This structure was a crucial factor in the decision making process for the Sponsor, as the high proceeds level at 85% loan to cost made the project even more sensitive to changes in index rates.
$45,000,000 Bridge Loan – Construction Refinance for a 131-Key Luxury Lifestyle Hotel in San Francisco
March 14, 2018
George Smith Partners successfully closed a construction take-out and bridge refinance for a 131-key luxury/lifestyle hotel located in the heart of the trendy Mid-Market neighborhood of San Francisco. The proceeds were used to refinance costlier construction financing, including a large mezzanine facility. The loan featured an interest reserve, T&I reserve, and a working capital reserve. Additionally, the existing capital stack included Historical and New Market Tax Credits, and EB-5 Capital – adding to the overall complexity of the Transaction.
GSP’s mandate was to source a lender who not only had the existing wherewithal to understand the complex existing capital stack, but also one who would recognize the value in the unique and strategic positioning of the Hotel. From non-traditional lodging options, to significant Food and Beverage offerings, the Hotel stands out from the traditional hotel offering by spanning over multiple lodging markets: luxury and lifestyle. The seasoned Sponsorship group has a proven track record of developing and operating hotels of similar caliber.
The selected lender was able to recognize the unique positioning of the property’s offering and the strong sponsorship involved in the project.
All Terms Confidential
January 31, 2018
George Smith Partners successfully arranged $4,300,000 to refinance a 15 key motel on Coronado Island, San Diego. GSP identified a local lender who understood the Sponsor’s entitlement play based on their past success, their proposed development plans post entitlement, and the value of the land, which was exempt from any influence of the California Coastal Commission. Ultimately, the lender sized the loan to 66.8% of “As Is” appraised value. The two-year interest only note is priced at 4.50% above LIBOR and has 2 six-month extension options. Upon successfully obtaining the required entitlements, the Sponsor plans to refinance with a construction loan for a planned 39 key hotel.
November 22, 2017
George Smith Partners arranged the 65% of cost reposition and conversion financing of a historic building to a 96-key upscale boutique hotel in Seattle, Washington. A 75-year ground lease was recently renegotiated to make debt financing more palatable. The capital structure implemented a historic tax credit funding to facilitate the property reposition and conversion of use. GSP underwrote the monetized value of the ground lease to articulate the gross lease payments were below the actual cost of what the land acquisition would have been to the project: IE; it is less expensive to lease the land rather than acquire in an arms-length transaction. Terms of the 65% loan-to-cost non-recourse loan are confidential.
$50,000,000 Non-Recourse Construction Loan to Develop Los Angeles International Airport Dual Branded Hyatt Hotel
November 8, 2017
George Smith Partners arranged $50,000,000 in non-recourse senior construction financing for the adaptive reuse of a 1960s vintage office tower one block from LAX in Los Angeles into a dual-branded Hyatt Hotel. The Sponsor’s business plan is to convert the existing 13 story 250,000 square foot office building into a 401 key Hyatt House and Hyatt Place hotel that features a trendy Mid-Century inspired urban design. The completed project, which will feature both select service and extended stay products, will capitalize on the LAX hotel submarket’s historically high occupancy rates and strong demand drivers. Sized to 50% of total project cost, the interest only loan will float at a spread of 425 basis points over 1 month LIBOR for 3 years and carries two 1-year extension options.
It was crucial to find a lender who was comfortable with hotel construction financing at this point in the cycle, a significant tranche of EB-5 financing, an unsubordinated ground lease and a parking agreement with an adjacent parking garage owner. As the Sponsor’s required bank execution, it was critical that the transaction was structured to comply with High Volatility Commercial Real Estate (“HVCRE”) banking regulation.
GSP sourced a lender with extensive experience in ground-up hospitality transactions and with a favorable view of the supply constrained LAX submarket. GSP demonstrated the Sponsor’s attractive basis in the asset, the submarket’s resilient occupancy rates and average daily rates, and the project’s appealing design relative to the submarket’s dated competitive set, which ultimately allowed the capital provider to get comfortable with the transaction. GSP also assisted in structuring the transaction to ensure HVCRE compliance.
October 25, 2017
George Smith Partners placed $3,710,000 financing on a 79-unit limited service hotel in the Southwestern United States. Constructed in 2010 by our Sponsor, all loan proceeds were used to refinance the existing debt and cover closing costs. GSP identified a lender who was comfortable with the borrower’s strength and understood the economics of the transaction. During underwriting, the appraisal came in at a value more conservative than expected. Our capital source agreed to advance a short term commercial loan of $200,000 at Prime plus 1.25%, self-amortized over 5 years to avoid the need for additional cash equity infusion from our Sponsor. Fixed for 5 years at 5.25%, the senior loan floats for two years at Prime plus 1.25% for the seven-year term.
Rate: 5.25% fixed for 5 years, Prime plus 1.25% thereafter/ Prime plus 1.25%
Term: 7 years, fixed for 5 years / 5 years
Amortization: 25 years / 5 years
Prepayment: 5% 4% 3% 2% 1%
Lender Fee: 0.50%
- Advisors: Ameet Chagan
October 18, 2017
George Smith Partners successfully placed the refinance on the flagship 317 room Pendry Hotel in the historic Gaslamp quarter of downtown San Diego. The Hotel and the brand were launched in early 2017 as the new luxury hotel brand operated under the Montage platform. Pendry fills the void between service-oriented luxury hotels and design-oriented boutique hotels. In 2014, GSP successfully placed the construction financing. Proceeds from this refinance were used to repay that facility.
GSP’s mandate was to source a lender who would recognize the value in the unique attributes for this Hotel, including its unique Food & Beverage offerings. While there were numerous financing providers who were interested in this opportunity, our client ultimately selected a national debt fund that understood the strength in the asset, the strong capabilities of the Sponsor and market demand of both business and leisure travelers who will frequent the property over the coming years.
$13,740,000 Non-Recourse Acquisition Bridge Loan of Land Parcels For a Future $200,000,000 Mixed-Use Hotel Development Project; 5-Day Close
September 27, 2017
George Smith Partners successfully placed a $13,740,000 acquisition bridge loan to acquire two land parcels and refinance three adjacent land parcels for a large mixed use hotel and condo development site in the heart of the Koreatown district of Los Angeles. With the final components of the land assemblage completed, the $200,000,000 mixed used development project is scheduled to break ground in March of 2018. Our Sponsor’s initial business plan was to build the mixed use project on three parcels of land previously held in his portfolio. The opportunity to acquire two adjacent parcels will allow him to double the total buildable square footage of the project. Fixed for 12 months, the non-recourse loan does not carry any prepayment penalty and closed in 5 days.
It was crucial to identify a lender who could close quickly, provide leverage, and waive any prepayment penalty. Due to the upcoming March 2018 groundbreaking, existing tenants on the current 3 parcel assemblage were all on short term leases with discounted rents. As a result, in place cash flow had been compressed and limited the ability for institutional lenders to get comfortable with the property and provide meaningful proceeds. Additionally, a fast close was necessary to take advantage of a seller discount.
GSP identified an unconventional lender who focused on the future value of the five parcel assemblage and shovel ready development site rather than the current value based on in-place NOI. This capital provider closed the loan in 5 days, allowing the Sponsor to achieve a significant discount on the purchase price. The capital provider also waived all prepayment penalties, assuring the Sponsor would preserve significant capital once the subsequent construction loan is placed within the next few months.
$35,000,000 Senior Construction Loan for Hotel Woodlark, a 150 Key Boutique Hotel in Portland, Oregon
July 5, 2017
George Smith Partners facilitated financing for the repositioning of a historical hotel and re-development of the adjacent office building into a boutique, center city, hospitality destination. The asset is situated on a half city block in Downtown Portland. GSP was able to leverage the Sponsor’s track record and identify the key indicators that establish Portland as a burgeoning region, as well as use statistics to evidence the demand for a hotel of this caliber. Additionally, GSP was able to assist the client in negotiating favorable lending fees.
May 10, 2017
George Smith Partners secured $5,100,000 in proceeds for the refinance of a 66 key all-suite Best Western in Southern California. The loan was priced over the 10 year treasury. The rate was locked at application to eliminate interest rate risk. GSP was able to identify a balance sheet lender who would be able to fund prior to the client’s original loan maturity date, provide straight forward loan documents with no legal fees, and provide an efficient due diligence process. The lender was flexible with regard to ownership structure and future partnership buy-out provisions. The loan was approved in a timely manner and closed 45 days after signed application.
February 15, 2017
George Smith Partners arranged a $2,700,000 cash-out refinance bridge loan on an unflagged boutique hotel in Sacramento, California. The Borrower approached GSP seeking a financing solution from a lender that could close quickly, provide capital to renovate, and bridge until stabilization. GSP identified a lender who was comfortable lending on an unflagged hotel in the middle of renovations and located in a secondary market. During due diligence, an unpaid occupancy tax from the prior owner was discovered. With the prior ownership unable to pay the tax, the county placed a lien against the property, even though it was under new ownership with no relation to the prior owners. This created a setback for closing, as title could not be cleared until the tax, interest, and fees were paid in full. The borrower weighed the cost of litigating to fight the liens, but chose to pay off the liens which allowed the lender to close on time. Sized to 50% of cost, the interest only loan has an 18 month term to allow for full stabilization of the property and has no prepayment penalty. The loan is priced at 7.90% for the first twelve months and 8.30% thereafter, for the remainder of the term.