Chesapeake Lodging Trust Nabs $60M Loan
- Jul 09, 2012
Relying on two key Manhattan properties as collateral, Chesapeake Lodging Trust has obtained a $60 million loan through Wells Fargo Bank N.A. The financing is secured by the Holiday Inn New York City Midtown–31st St. and Hyatt Place New York Midtown South.
The two-year term loan, which bears interest equivalent to LIBOR plus 3.25 percent and provides the option for three one-year extensions, is not your typical loan; its structure is multi-faceted, to say the least.
The funds come in two phases. Chesapeake walked away with a $25 million advance at the initial completion of the transaction, having relied on the 122-room Holiday Inn 31st St. as collateral. Chesapeake has owned the 18-story hotel tower since acquiring it for $52.2 million in December 2011, marking the company’s entrée into Manhattan. In conjunction with the closing of the first phase, the REIT entered into an interest-rate swap that fixed the rate on the $25 million segment of the loan at an annual 3.75 percent for the initial two-year term.
Chesapeake will come into possession of the remaining $35 million, secured by Hyatt Midtown South, after development of the 185-room lodging destination reaches completion and Chesapeake closes on its acquisition. The company entered into an agreement in January to acquire the 25-story hotel for $76.5 million. An interest-rate swap is also planned for the $35 million portion of the loan.
And there’s more. When the second segment of the transaction closes, the hotels will secure the entire $60 million principal amount of the loan, the proceeds of which will be utilized to repay borrowings under Chesapeake’s revolving credit facility.
More loans may very well be in Chesapeake’s near future. “We continue to focus our efforts on strengthening our balance sheet and financial position as we move through 2012,” Douglas Vicari, executive vice president & CFO, said during the REIT’s first quarter earnings conference call in May. “We intend to utilize the debt markets to help us manage our interest rate exposure and debt maturities as our capital structure continues to evolve as a company.”