Scott Monasch, Principal with Barry Slatt Mortgage in its Walnut Creek office, recently arranged and closed a $16,000,000 construction loan on a Starwood branded hotel in the Tri-Valley Market/Dublin, CA. The 127 room hotel will anchor a 14-acre mixed use development that will include retail shops, restaurants and 120 residential townhomes. The hotel will be the first to break-ground. A-loft is one of the fastest growing brands in the history of hospitality, offering distinctive design, accessible technologies and a buzzing social atmosphere. The loan was structured with a 24 month term and 2(two) 6 month extension options, to allow the hotel to stabilize operations while the interest only period is still in place. The loan was competitively priced with a spread over prime at 65% loan to cost. The developer had recently purchased the land and was able to use that as a large portion of the equity. However the land did not have its own APN at the time of purchase (had a two acre allocation of the 14 acre’s) and needed to be bifurcated by a lot split to close the construction loan. The developer/owner had a strong track record of ground up hotel developments and brought in a contractor they had worked with on previous projects successfully.
Despite the excellent location and developer strength in Hotel development and hotel ownership, the assignment required an extensive outreach to the Financing market, to find and execute the construction loan. A very in depth loan proposal and underwriting package was completed and necessary to educate the potential lenders about the real estate market, borrower/developer experience and the metrics of the hotel market and projections for the subject. As a special use property that overlaps real estate and business operations, the lending arena is much smaller than for more traditional types of real estate. Mr. Monasch has extensive experience in hospitality lending and was able to create a market for the loan within the interested lenders, by educating them on the myriad of strengths of the project and borrower. Construction loans in general carry greater risk than existing, stabilized tenant occupied real estate. It is very important for the borrower to align themselves with experienced partners in all aspects from contractors, architects, mortgage banking/financing, hotel brands/franchises, municipality consultants, etc. when building a hotel. With many looking at the economy as nearing a peak of the current cycle, more scrutiny is placed on new construction in general. Hospitality is even more susceptible to economic cycles and requires further investigation into existing room supply, age of the supply, new rooms coming on-line, demographic trends, occupancy percentage, room rates and a look back at the aforementioned statistics in the last recession. In recognizing the challenges, Monasch was able to provide the requested financing at competitive terms, while in a changing/slowing environment for construction loans.
|PROPERTY||LENDER TYPE||TRANSACTION TYPE||LOAN AMOUNT||PRODUCER|
|Walgreen's Stores||2 CMBS / 1 Bank||Purchase||$14,700,000||Michael Kaplan|