Cornerstone Comes Through for Blackstone in a Big Way

Cornerstone Real Estate Advisers originated a $335 million loan to fund Blackstone's acquisition of four Club Quarters hotels across the U.S.
Club Quarters Boston

Club Quarters Boston

New York—Private equity firm Blackstone called, and Cornerstone Real Estate Advisers LLC answered. Acting on behalf of an institutional investor, Cornerstone recently originated a $335 million loan for a Blackstone affiliate’s acquisition of a four-property Club Quarters Hotels portfolio featuring 1,228 guestrooms in four top-tier U.S. markets.

The sponsorship is top notch and the properties, which are based on a membership hotel business model, tick the right boxes, including the all-important location category. Premier cities on the East Coast and West Coast, as well as in the Midwest and Mid-Atlantic—the portfolio covers quite a bit of ground. The collection consists of the 346-key Club Quarters San Francisco; the 178-key Club Quarters Boston; the 429-key Club Quarters Chicago Central Loop; and Club Quarters Philadelphia, a 275-key property.  Sited in center-city markets, the upscale hotels are all within close proximity to a host of business and leisure demand drivers. It was an opportunity Cornerstone couldn’t pass up.

“Risk is mitigated by geographic diversification, significant cash equity in the transaction providing alignment of interest, attractive loan basis per key and business model that provides membership with an attractive value proposition relative to other hotels in each respective market,” Jamie Henderson, chief investment officer, alternative investments at Cornerstone Real Estate Advisers, told Commercial Property Executive.

There was even more for a lender to love. The upscale hotels are high-quality properties—more than $16 million has been shelled out on upgrading the assets since 2009, with $8 million of that capital having been invested in 2013 and 2014. As reported by Real Estate Alert in March, Blackstone paid Masterworks Development approximately $404 million for a group of Club Quarters hotels.

A repeat performance may in the offing for Cornerstone. The global real estate investment manager completed $17 billion of transactions in 2015, 48 percent of which involved real estate debt. “2016 year-to-date investment activity is on pace with the same timeframe last year,” Henderson said. “We believe the second half of 2016 should provide excellent opportunities for debt providers due to a robust pipeline of maturities from loans that were originated in 2006.”