$115,000,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 326-Key Four-Star Radisson BLU Hotel in Anaheim, CA

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.

Transaction Description:

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.

Transaction Description:
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.

Challenges:
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.

Solution:
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.