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$14,000,000 Non-Recourse Upscale Boutique Hotel Reposition Financing on Ground Lease

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.

Related Financings

  • $15,050,000 CMBS Non-Recourse Permanent Financing for the Acquisition of a 130-Key Marriott Branded Select-Service Hotel; Corona, CA

    August 7, 2019

    Transaction Description:

    George Smith Partners successfully arranged $15,050,000 in non-recourse permanent financing secured by a 130-room Marriott branded select-service hotel in Corona, CA. The hotel is located at the gateway of the Inland Empire, close to the freeways. The loan is sized to 72% LTV fixed for 10 years at 4.79% with 30 year amortization.

    The Sponsor acquired this hotel as an expansion of their current hospitality portfolios. They were looking for high leverage financing to minimize the cash down payment required at closing.

    GSP sourced a lender willing to provide higher LTV than most other hotel lenders on a non-recourse basis which minimized the Sponsor’s cash equity contribution at closing. The Lender understood the potential of the Inland Empire lodging market and was able to navigate through the complexities of the transaction and loan process. GSP facilitated and expedited the closing in order to meet the deadline of the purchase contract. Additionally, GSP pre-negotiated with the Lender to waive their $7,500 application fee and capped their legal fees at $35,000.

    Rate: 10 year Swap + 2.78%
    Term: 10 year fixed rate loan
    Amortization: 30 years
    LTV: 72%
    Debt Yield: 10.9%
    Debt Coverage Ratio: 1.70x
    Prepayment: Defeasance
    Guaranty: Non-Recourse
    Lender Fee: Par

  • $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

  • $3,400,000 Covered Loan for New Hotel Development 80% LTC; Los Angeles, CA

    July 10, 2019

    George Smith Partners secured financing for a non-recourse $3,400,000 covered land loan for a hotel development in Los Angeles. There is currently an existing building on the Property which allowed GSP to structure a highly leveraged land loan. Usually land loans are limited to 50% of the purchase price, but GSP’s strong relationships and experience allowed for the value of the current improvements to achieve much higher leverage.

    Rate: 8.3%
    Term: 1 Year
    Amortization: Interest only
    LTV: 80% of Purchase Price
    Prepayment: None
    Guaranty: Non-Recourse
    Lender Fee: 1%

  • Non-Recourse Permanent Financing for Downtown Detroit Boutique Hotel

    April 10, 2019

    Transaction Description:
    During the downturn our Sponsor identified a rundown non-operating hotel in downtown Detroit. Investing over $10 million in upgrades/renovations our Sponsor was able to create one of Detroit’s finest trendy boutique hotels and restaurants. From an extremely distressed site the Developer was able to open this 144 room boutique hotel that pays tribute to, “Made in Detroit”. The turnaround of the Property, led to a turnaround of the entire neighborhood.

    Challenges:
    Hotels are one of the most difficult property types to finance. Hotels outside major cities are even more challenging and Detroit hotels are the most difficult.

    The result was that most capital providers refused to consider looking at the site. In addition, the Sponsor had the grand opening only about 18 months ago which caused many groups to be concerned about the ability to succeed long-term. Finally, non-recourse hotel financing is problematic because hotels are part real estate and part operating businesses.

    Solution:
    George Smith Partners successfully placed a non-recourse, senior loan which was securitized and sold to investors. GSP determined that by placing the loan within a Mortgage-Backed Securities pool, the overall strong yield would benefit the pool and the location risk would be minimized. With this structure, our Sponsor was able to buy out his partners and repay a personal loan he made to the Property. Because of our expertise in this type of financing, we were able to identify an international bank, which could speed up the process and work with the Sponsor’s attorney to navigate the complex issues of a securitized loan. With interest rates moving down at the end of the process we were also able to reduce the 6.05% floor rate by 35 bps and expand the amortization to 30 years. Within 35 days of going into application we were able to allow our Sponsor to buy out his partners, obtain a non-recourse loan that repaid an internal construction loan and close at better rate and amortization than originally quoted.

    Proceeds: Confidential
    Rate: 5.7% Fixed for 10 Years
    Term: 10 Years
    LTC: 75%
    LTV: 50%
    Lender Origination Fee: None
    Recourse: Non-Recourse

  • $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

    December 5, 2018

    Transaction Description

    George Smith Partners placed a $115,000,000 non-recourse senior construction loan for the ground up development of a 326-key four-star Radisson BLU Hotel in Anaheim, CA. The Property is located in the Disneyland/Anaheim Convention Center submarket less than 1 mile from Disneyland Park. Once completed, the 12 story luxury hotel will be one of the few four star offerings available outside the Park and will feature an innovative, modern design. The amenity rich property will include a rooftop pool and deck with unobstructed views of the famous Disneyland nightly fireworks show and surrounding area. Catering to the Park-going family travelers, bunkbeds will be included in over half the rooms, and the hotel will feature a ground floor pool as well as upscale food and beverage offerings.

    Challenges

    The Project will be the first major development east of Interstate 5 in the Disneyland submarket. Additionally, the Hotel is slated to be the 4th Radisson BLU in the United States and will be one of the first four-star offerings available outside of the Disneyland Park.

    Solutions

    GSP focused on the submarket’s underlying fundamentals, including 28 million annual visitors, as well as its resilient occupancy rates and average daily rates that stayed relatively consistent through the recession. GSP also demonstrated that the Hotel is likely to capture an outsize share of the submarket’s 4 million annual international visitors. This is due to Radisson’s strong international branding supported by the fact that nearly all 300 Radisson BLUs are located outside the United States. Finally, GSP highlighted the Hotel’s upscale nature, which currently does not exist outside the Park, family friendly design and strong amenity package.

    These efforts resulted in a high leverage, non-recourse execution.

    All terms are confidential.

  • $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

    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.

    Rate: 1 Mo. LIBOR + 7.50%
    Term: 3+1+1
    Amortization: Interest Only
    LTC: 68.0%
    Guarantee: Non-Recourse (with standard bad boy carve-outs)