Mesa West Provides $130M to Refi Hyatt Regency San Francisco

Mesa West Capital has provided a partnership involving affiliates of Dune Real Estate Partners L.P. and DiNapoli Capital Partners L.L.C. with a $130 million first-mortgage loan for the refinancing of the 802-room hotel in downtown San Francisco.

February 8, 2012
By Barbra Murray, Contributing Editor

Mesa West Capital looked at the Hyatt Regency San Francisco’s impressive performance, its increasingly strong market and its solid ownership and decided to put its money where its mouth is. The portfolio lender has provided a partnership involving affiliates of Dune Real Estate Partners L.P. and DiNapoli Capital Partners L.L.C. with a $130 million first-mortgage loan for the refinancing of the 802-room hotel in downtown San Francisco.

“In the context of the hotel world, definitely lenders are warming up to the San Francisco hotel market because it’s arguably, outside of New York, the strongest hotel market in the United States,” Thomas E. Callahan, co-president & CEO-West, with PKF Consulting USA, told Commercial Property Executive.

Dune and DiNapoli snapped up the Hyatt Regency San Francisco from a subsidiary of Strategic Hotel Capital L.L.C. in 2007, after which point the team initiated a major renovation program at the 19-story property. Built in 1973 along the waterfront at 5 Embarcadero Center, the lodging destination sits in the bustling Financial District and features 67,000 square feet of function space, as well as a fitness center, restaurant and lounge.

As Ronnie Gul, principal with Mesa West, noted in a press release on the refinancing deal, the Hyatt Regency San Francisco is “outperforming the market in both rate and occupancy.” It’s an impressive achievement given the enviable strength of the city’s hotel market. The lending community may not be as keen on the hospitality sector as it is on multi-family, however, there are always exceptions and San Francisco’s hotel market is one of them.

“Room rates and RevPAR are extremely high,” Callahan said. “Most hotels’ occupancies are in excess of 80 percent, room rates of most hotels increased 14 to 15 percent in 2011 over 2010, and most people are forecasting room rates to increase at 8 to 10 percent this year.”

Furthermore, he added, there is no new construction on the horizon in San Francisco, as opposed to New York, where a fair number of new rooms are scheduled to come online.

The San Francisco hotel market’s positive fundamentals and strength are the keys to opening the door to financing in the current environment. “The truth is, of course, most lenders aren’t really excited about hotels per se, but if you are a lender looking to lend money on hotels, San Francisco is perceived as one of the best markets you can be in.”