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$95,000,000 Ground-Up Construction for 317-Key Luxury Hotel

Non-recourse

 

Transaction Description: Malcolm Davies successfully placed the 70% of cost financing for the development of a newly branded Southern California luxury hotel, subject to a 99 year ground lease. The Non-Recourse debt allowed the Sponsor to break ground on a project that had been in the works for many years. Terms of the Non-Recourse construction loan are confidential.

Challenge: Leasehold ownership is secured with a 99-year ground lease to a private land owner. The Developer required a Non-Recourse structure in a capital market that is now only reviewing hospitality construction. Over 50% of the hotel’s revenue will be generated from Food & Beverage.

Solution: GSP was able to underwrite the true 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 was less expensive to lease the land rather than acquire in an arms-length transaction. GSP sourced a lender who has extensive knowledge in the luxury hospitality market and was comfortable to provide the Non-Recourse financing. With a large F & B allocation, GSP documented like kind hotels in the market to assure that the project’s figures were indeed inline to the performance of the hotel.

Related Financings

  • $42,200,000 Mid-Construction to Bridge Refinance of 133-Key Extended Stay Hotel; Nashville, TN

    August 10, 2023

    Transaction Description:

    George Smith Partners successfully arranged $42,200,000 in financing to recapitalize the construction of a 133-key extended-stay hotel on Music Row in Nashville, TN. The Lender disbursed 71% LTC, accompanied by a 12-Month interest reserve.

    Multiple challenges were encountered when discussing the transaction with capital providers. The first being that the hotel is unflagged- many hospitality lenders focus primarily on popular hotelier affiliations during this risk-constrained lending environment. The team encountered a second hurdle related to mid-construction refinancing, which presented a challenging proposition from the outset of our campaign due to the hotel’s planned grand opening before November of 2023.

    The GSP team was determined to leverage the deal with support from the local Nashville sponsor that owns and manages over 600 keys in the Nashville market and over 2,000 keys in the southeast, property location on Music Row in Nashville, and construction completion.

    GSP successfully identified a hospitality Lender that exhibited confidence in the construction recapitalization process. This Lender was equipped to furnish the necessary funds to facilitate a smooth transition into TCO. Additionally, displaying confidence in the projected Average Daily Rate (ADR) assumptions. Notably, the Lender displayed comfort in financing the unflagged and extended-stay hotel, due to the Sponsor’s reputable track record in the market.

    Term: 2 Years with Extension Options
    Prepayment: Open After 18 Months
    LTC: 71%

  • $47,000,000 Construction Financing for a 102 Key, Four Star, Boutique Hotel; California

    June 7, 2023

    Transaction Description:

    George Smith Partners arranged a $47,000,000 fixed-rate, non-recourse, construction loan for the development of a four-star boutique hotel in a coastal community of California. When completed, the property will include 102 rooms and a fine dining restaurant.

    Challenges:
    The project experienced significant public resistance and ultimately, entitlements took 20 years to obtain. GSP was originally engaged to arrange institutional equity and fixed-rate construction to perm debt in the spring of 2022. GSP was successful in doing so, however, market volatility caused the deal to stall and ultimately the developer elected to dispose of the project to another developer. The new developer engaged with GSP to obtain new financing terms.

    Solutions:
    GSP focused on the strength of the sponsorship team, high barriers to entry, supportive hotel flag, positive historical occupancy, ADR-both before and after Covid, popularity of the local demand drivers, as well as the lack of competing quality hospitality properties in the immediate vicinity. Ultimately, GSP arranged a solution that met the needs of the sponsor.

    Rate: Fixed at 8.60%
    LTC: 65%
    Term: 2 Years + 1 Year Extension Option
    Fees: 0.50% Lender Fee
    Guaranty: Non-Recourse except for Standard Carveouts

  • $42,500,000 Construction Financing for a 496-Key Hotel-to-Multi Conversion; Colorado Springs, CO

    February 2, 2022

    Transaction Description:

    George Smith Partners arranged $42,500,000 in construction financing for the conversion of a 496-key hotel to a market rate multifamily complex in Southeast Colorado Springs. Spanning 17 acres, the Project features 496 units and boutique amenities: restaurant & bar, fitness center, indoor & outdoor swimming pool, sport court, convenience store, and 294 self-storage units that will be made available to the public. The financing capitalized the hotel acquisition, renovation, and targeted deferred maintenance.

    Colorado Springs is an ultra-high-growth submarket and consistently ranked as one of the best places to live in the United States. Bolstered by substantial job diversification, there has been an influx of young professionals and military personnel due to the surrounding five military bases. The Sponsor identified the hotel as a prime candidate for the conversion, offering a low basis, and best-in-class amenities to create significant value and drive occupancy rates. GSP was able to identify a lender who not only understood the pent-up demand for affordable housing in the booming submarket, but also the Sponsor’s ability to execute on the intended business plan.

    All Terms Confidential

  • $16,300,000 Non-Recourse Construction Loan for Development of a 115-Key Hotel; West Sacramento, CA

    October 8, 2019

    Transaction Description:

    George Smith Partners arranged $16,300,000 in non-recourse construction financing for the ground-up development of a 115-key select-service, extended-stay hotel in West Sacramento, California. The Project is located across the bridge from Downtown Sacramento on a main thoroughfare and within direct proximity to the newly built West Sacramento City Hall. The Project is well positioned as an economic alternative to travelers and a convenient option for long-term local guests. The financing allows the Sponsor to break ground on their third hotel under development in the greater Sacramento metropolitan area.

    GSP identified a capital provider who was intent on securing a long-term relationship with the Sponsor, recognizing their extensive hospitality experience and ability to execute both on the construction and on the overall business plan with a high-degree of surety. Forming this relationship earned them a highly leveraged deal, sized to north of 80% of total project costs. The interest only, non-recourse construction loan is priced at a spread of 1 Month LIBOR plus 750 basis points, with a three-year term and two 12-month extension options. GSP highlighted the submarket’s various economic drivers, demonstrating its appeal as a pioneering and cost-effective market with tremendous growth potential.

    Rate: 1 Month LIBOR + 7.50%
    Term: 36 Months with Two 12-Month Extensions (3+1+1)
    LTC: 80%
    Amortization: Interest Only
    Guaranty: Non-Recourse

  • $460,000,000 Non-Recourse Senior Construction Financing for the Ground Up Development of Block 216, a 35-Story Mixed-Use High-Rise Anchored by a 251-Key Ritz Carlton Hotel; Portland, OR

    July 24, 2019

    Transaction Description:

    George Smith Partners structured and placed a $460,000,000 non-recourse senior construction loan for the ground up development of Block 216, a landmark 1.1 million square-foot ground-up high-rise development in the heart of Portland, Oregon’s central business district. The 35-story luxury high-rise will be anchored by a 251-key five-star Ritz-Carlton hotel, the first five-star hotel in Portland. The development also features Ritz-Carlton branded residences, 140,000 square feet of Class A office space, and 7,800 square feet of ground floor retail, which will open up to a pedestrian “festival street.” Located at the intersection of the Central Business and Pearl Districts, Block 216 spans a full city block. This is extremely rare in Portland. Upon completion in 2023 Block 216, will be the fourth tallest high rise in Portland and the largest tower in Portland based on square footage.

    Challenges:

    Block 216 represents the first luxury, five star hotel and branded residential project in Oregon. It is also the first project with amenities common to luxury properties but absent in Portland thus far. This ground up development is also a true mixed used project with four different uses (hotel, residential, office and retail) in a single building.

    Solutions:

    GSP focused on Portland’s incredibly strong underlying fundamentals, including: its population of 2.5 million; its unemployment rate 50 basis points lower than the national average; its 1,200 tech companies (hence the name “Silicon Forest”); the impressive number of blue chip companies with presences in the market; and, the considerable number of institutional investors active in the market. GSP also stressed the Project’s unparalleled location and walkability to every major amenity in Downtown Portland as well as the 30 new conferences booked at the Portland Convention Center as a significant demand driver for five star accommodations.

    GSP executed significant and high profile marketing to ensure the Project was appropriately received in the capital markets. These efforts resulted in a highly structured, non-recourse execution in less than six months from engagement.

     

    All terms confidential

  • $23,600,000 Non-Recourse Construction Loan for a 118-Key Hotel Project in Downtown Davis, CA

    June 12, 2019

    Transaction Description:

    George Smith Partners arranged $23,600,000 in non-recourse construction financing for the ground-up development of a 118-key select-service, extended-stay hotel in downtown Davis, California. Sized to 82.5% of total project cost, the interest only loan will float at a spread of 825 basis points over one-month LIBOR for three years and carries two 12-month extension options. With immediate access to the highway, the Project is five minutes from UC Davis and 20 minutes from downtown Sacramento. This financing allowed the Sponsor to begin construction on their third hotel project near the University.

    GSP sourced a lender who shared the Sponsor’s vision and negotiated a unique and capitally efficient funding structure on the behalf of the Client. GSP demonstrated the submarket’s resilient occupancy rates and the Project’s appealing design relative to the submarket’s dated competitive set.

    Rate: L + 825
    Term: 3 + 1 + 1
    LTC: 82.5%
    Amortization: Interest Only