$13,000,000 Hotel Bridge Loan

Transaction Description:  GSP arranged a bridge loan for the refinance of a seller carry-back plus “PIP” (Property Improvement Plan) of a flagged hotel in an industrial-centered section of Los Angeles. The bridge loan allowed the Borrower to replace the existing loan at a lower rate and provided additional funds for the hotel’s capital improvements.

Challenge: The Sponsor purchased the 200+ room hotel post-foreclosure in 2010. The previous operator poorly managed the asset causing occupancy and daily rates to fall. The bank foreclosed and our client purchased the hotel at a new, discounted basis from the original note. The foreclosing bank agreed to carry back 50% of the purchase price with the balance in cash. Because the property changed hands, the hotel franchisor required the new Sponsor to perform a substantial PIP to maintain the flag. With low attractive bank debt currently in the 1st position, our initial assignment was to identify a 2nd Trust Deed lender to finance the capital upgrades. Our lender conversations stalled when an inter-creditor agreement could not be negotiated with the 1st Trust Deed bank.

Solution: GSP returned to the market and identified a lender willing to finance the entire capital stack at a rate less than the current lender. The ultimate capital stack was substantially lower in rate than the initial A/B structure sought by the borrower. The Sponsor enthusiastically moved forward on the new option and closed the loan paying off the selling bank’s first TD and providing additional dollars necessary to complete the PIP and maintain the franchise.