Transaction Overview
Ameet Chagan placed the $2,370,000 refinance of an exterior corridor economy class motel built in 1961. The Howard Johnson flag services the San Mateo and San Francisco International Airport markets. The floating rate loan is set at Prime plus 1.00%, floored at the 4.25% start rate for 7 years, and amortized over 25 years with no prepayment penalty. The Borrower is a second generation hotel operator with a portfolio of hospitality assets in the Bay Area.
Challenge: The Borrower was already enjoying a market rate and term on a first trust deed for $1,500,000. The first position loan was acquired two years ago and came with a sizable origination cost. The Borrower wanted to refinance a double digit interest only second trust deed of $730,000, but feared the net cost of the new debt including prepayment penalties and sunken origination costs from the previous refinance would not allow any net savings. The asset quality and size of the transaction precluded the property from being financed through more established institutional lenders.
Solution: GSP calculated a break even interest rate that would net savings inclusive of all costs associated with the new loan. GSP identified a lender with an allocation for hospitality and the ability to recognize the superior in fill location of the real estate. The Borrower’s consistent re-investment in the asset was evidenced by the upgraded amenities. GSP also negotiated a commitment fee 50 basis points below the initial pricing guideline. The 25 year amortization schedule incentivized the Borrower to move forward as the longer amortization significantly lowered monthly payments in comparison to their current loan payments.
