HFF Fashions Nine-Digit Financing Deal for Five-State Hotel Portfolio

It's a great time to be a borrower right now, according to HFF.
Michael Weinberg, HFF

Michael Weinberg, HFF

“It’s a great time to be a borrower right now,”Michael Weinberg, director with HFF, told Commercial Property Executive. HFF recently orchestrated a $110 million financing package for a 2,566-room, five-state hotel portfolio on behalf of the ownership, a joint venture consisting of Värde Partners Inc., Interstate Hotels & Resorts and Waramaug Hospitality Management.

“The most important aspect to any deal from a lender’s perspective is sponsorship. In this deal, we had stellar sponsorship which was very appealing to lenders,” Weinberg added.

CCRE certainly felt the pull; the commercial real estate finance company supplied the partners with a five-year floating-rate loan on the seven-property portfolio, the proceeds of which will be utilized to refinance existing debt.

The collection of full-service hotels includes three assets in Florida: the Sheraton Tampa East (formerly Crowne Plaza Tampa East), offering 266 rooms; the 382-key Sheraton Orlando North; and the Radisson Resort Orlando Celebration, which, with 718 rooms, is the largest property in the portfolio. Out West are the Hilton Concord featuring 329 rooms in Concord, Calif., and Albuquerque, N.M.’s Sheraton Albuquerque Airport with 276 rooms.  The 295-key DoubleTree Williamsburg in Williamsburg, Va., and the 300-key Crowne Plaza Columbus North in Columbus, Ohio, round out the group.

Varde Portfolio - Financing Memo 10.2.14.indd

Hilton Concord, Concord, Calif.

The portfolio was amassed through a series of acquisitions between 2011 and 2013, and the joint venture commenced renovations of the properties soon after every purchase, spending a total of approximately $50 million on the sweeping upgrades. The effort, along with the institution of professional management, has since paid off in the form of a significant increase in performance, which also caught the eye of lenders.

Also working to the joint venture’s advantage is, as Weinberg points out above, the simple but all-important matter of timing. The hotel sector, while not as hotly pursued as the apartment sector, has certainly gained in favor in the capital markets over the last few years. A recently released annual report by PKF Hospitality Research attributes the improvements, which are forecasted to continue into the foreseeable future, to the perfect storm: revenues are up for operators, profits are up for owners and defaults are down for lenders.

“Hotel lending is back in vogue, although it’s still inefficient,” Weinberg concluded. “We advise clients that while there may be more capital chasing hotel loans today, most lenders have a limit on how much they allocate to hospitality and that bucket can fill up quickly so it’s good to go to multiple sources.”