California

Ameet Chagan placed the $4,250,000 acquisition loan for the purchase of a 56 key limited service hotel in California’s’ San Joaquin Valley. The loan represented 96% of the contracted purchase price. Our Sponsor entered into a management contract five years ago with an option to acquire the distressed hotel at the face value of the note. Sized to 70% of “as-is” value, the non-recourse loan is fixed for five years at 5.625% and amortizes over 25 years. Challenge: With the insertion of the new operating manager, the prior lender consented to a loan extension on an interest-only basis to avoid a default. With no opportunity for a short-pay, our Sponsor had a finite window to exercise his purchase option and prevent the foreclosure. Although a strong operator, the Sponsor lacked the traditional 30% cash down-payment required for a hospitality purchase. The tertiary market and sub-$5,000,000 loan request ruled out most debt funds. Solution: GSP worked with a lender with familiarity in hospitality who had completed several structured finance transactions with GSP in recent months. GSP documented the tremendous value added to the property by our Client and gave credit for cash re-invested out of operating cash flow after debt service, in addition to the fresh cash equity added to this purchase escrow. Strong market fundamentals and a comparatively low loan per key, off-set tertiary location concerns. A new nationally recognized flag added further support to the Borrowers’ cash flow projections as operating cash flow more than doubled since the execution of the purchase option. The 12 month trailing debt yield exceeded 12% at the time of funding.