Sonnenblick-Eichner Arranges $110M Refi for SF InterContinental

The loan for the upscale 550-key downtown hotel was funded by a Wall Street investment bank. The first mortgage could be part of a trend toward more refinancings in 2018.

InterContinental San Francisco
InterContinental San Francisco

Sonnenblick-Eichner Co., of Beverly Hills, Calif., has arranged $110 million in first mortgage financing to refinance the InterContinental San Francisco, a 32-story, 550-key hotel next to the Moscone Convention Center in downtown San Francisco’s South of Market (SOMA) district.

The AAA Four Diamond hotel includes 43,000 square feet of meeting, banquet and pre-function space; Luce, a Michelin-rated restaurant; a 10,000 square-foot spa; and underground parking with 180 valet spaces.

The interest rate for the 10-year, non-recourse, fixed-rate loan reportedly is in the low 4 percent range and was priced at less than 200 basis points over the swap rate. The loan was funded by an undisclosed Wall Street investment bank. “We received interest from both life insurance companies and Wall Street investment banks. Given the interest rate floors instituted by most life insurance companies, a securitized loan provided the best execution for the borrower,” Sonnenblick-Eichner Principal David Sonnenblick said in a prepared statement.

The new loan replaced an existing floating-rate LIBOR-based loan,” Elliot Eichner, also a Principal of Sonnenblick-Eichner, added. “With the approximate 80 basis-point increase in LIBOR over the last 12-month period in 2017, locking in a long-term fixed-rate loan provided the best alternative for the sponsor.”

The drivers of hospitality demand in California are flourishing, and among those is above–national average job growth in San Francisco, according to a second-half 2017 report from Marcus & Millichap. Over the previous 12 months the average daily rate in the San Francisco–San Mateo metro fell 9.6 percent (to $225.58), though that figure nonetheless remains the highest in the state.

A likely boom year for refinancing

In a Commercial Property Executive article last month, David Sonnenblick was one of several CRE experts who predicted a favorable 2018 for owners looking to refinance their properties. This year is expected by some to be a boom year, with ample capital for refinancing and low interest rates.

“We’re still seeing all commercial assets being very attractive,” including hotels, office and retail, Sonnenblick said. “[T]here’s plenty of capital for all product types.”

Image courtesy of Sonnenblick-Eichner Co.