Transaction Overview
Malcolm Davies successfully placed the 70% of cost financing for the development of a newly branded Southern California luxury hotel, subject to a 99 year ground lease. The Non-Recourse debt allowed the Sponsor to break ground on a project that had been in the works for many years. Terms of the Non-Recourse construction loan are confidential.
Challenge: Leasehold ownership is secured with a 99-year ground lease to a private land owner. The Developer required a Non-Recourse structure in a capital market that is now only reviewing hospitality construction. Over 50% of the hotel’s revenue will be generated from Food & Beverage.
Solution: GSP was able to underwrite the true 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 was less expensive to lease the land rather than acquire in an arms-length transaction. GSP sourced a lender who has extensive knowledge in the luxury hospitality market and was comfortable to provide the Non-Recourse financing. With a large F & B allocation, GSP documented like kind hotels in the market to assure that the project’s figures were indeed inline to the performance of the hotel.
