Rate: 1 Month LIBOR + 4.25%
Term: 3 + 1 + 1
Amortization: Interest Only
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.
Assistant Vice President
$17,725,000 Non-Recourse Construction Financing for a 127-Key Cambria-Branded Lifestyle Hotel in the Roosevelt Row Arts District of Phoenix, AZ
October 10, 2018
George Smith Partners secured $17,725,000 in non-recourse construction financing for the development of a 127-key Cambria-flagged lifestyle hotel in the Roosevelt Row Arts District of Phoenix, Arizona. This financing facility allowed the Sponsor to begin construction on the first of several projects slated for delivery within Roosevelt Row (Ro2). The Sponsor won a city-led RFP bid earlier this year that provided them with control and ownership of four contiguous city blocks within the core Ro2 area. This was the Sponsor’s first lifestyle branded hotel development and their first hotel development within the state of Arizona. These facts presented a challenge for many groups, despite their extensive experience developing other asset classes, including Monroe 44, the tallest residential building in Arizona.
GSP sourced a hospitality lender who shared the Sponsor’s vision and excitement about the revitalization of the historic community, recognizing their ability to execute this project under the Cambria Brand. Despite several collateral restrictions presented throughout the application process, GSP was able to facilitate creative alternative scenarios for security of both Lender and Sponsor, ultimately achieving a mutually agreeable solution and additional proceeds to cover the new shortfall. The three year floating rate note was priced at 1 Month LIBOR + 7.50%, and was sized to 68.0% of project costs.