$25,200,000 Acquisition and Redevelopment Loan for a 120 – Key Select Service Hotel in Davis, CA

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.

Transaction Description:
George Smith Partners secured $29,000,000 for the acquisition of the Aetna Springs Resort, a rare historic site in Napa County, CA. The Aetna Springs Resort dates back to the 1870’s and is the last available parcel entitled for resort development in the Napa Valley area. Upon completion, the Property will be expanded to include 88 luxury suites, 16 adjacent estate lots averaging 50-acres each, and a permitted winery.

Challenges:
While investors were intrigued by the location of the Resort, the 3,100 acres of land included 2,390 acres of land that was not adjacent to the Resort. Many investors shied away from the deal given the complexity of the collateral. Other investors were more conservative towards land loans given our point in the cycle.

Solutions:
George Smith Partners located an investor who understood Napa hospitality and understood the value in a new resort. They also took the time to understand the land/vineyard component of the collateral and were able to provide a structure that gave the Sponsor time to sell the non-adjacent collateral in an effort to maintain focus on the resort component.

Transaction Description:
George Smith Partners successfully placed a $13,740,000 acquisition bridge loan to acquire two land parcels and refinance three adjacent land parcels for a large mixed use hotel and condo development site in the heart of the Koreatown district of Los Angeles. With the final components of the land assemblage completed, the $200,000,000 mixed used development project is scheduled to break ground in March of 2018. Our Sponsor’s initial business plan was to build the mixed use project on three parcels of land previously held in his portfolio. The opportunity to acquire two adjacent parcels will allow him to double the total buildable square footage of the project. Fixed for 12 months, the non-recourse loan does not carry any prepayment penalty and closed in 5 days.

Challenges:
It was crucial to identify a lender who could close quickly, provide leverage, and waive any prepayment penalty. Due to the upcoming March 2018 groundbreaking, existing tenants on the current 3 parcel assemblage were all on short term leases with discounted rents. As a result, in place cash flow had been compressed and limited the ability for institutional lenders to get comfortable with the property and provide meaningful proceeds. Additionally, a fast close was necessary to take advantage of a seller discount.

Solution:
GSP identified an unconventional lender who focused on the future value of the five parcel assemblage and shovel ready development site rather than the current value based on in-place NOI. This capital provider closed the loan in 5 days, allowing the Sponsor to achieve a significant discount on the purchase price. The capital provider also waived all prepayment penalties, assuring the Sponsor would preserve significant capital once the subsequent construction loan is placed within the next few months.