ValueXpress has arranged an $8,630,000 first mortgage CMBS conduit loan for the Seaside Hotel Portfolio, consisting of the refinance of two independent hotels located in Seaside, Oregon. The purpose of the loan was to provide a return of equity to the sponsor and obtain a 10-year, fixed-rate loan term on a non-recourse basis to replace an SBA loan.
The sponsor constructed the River Inn at Seaside in 2014. The property is the top-ranked hotel in the area, according to TripAdvisor. The property features a saltwater indoor heated pool and spa, fitness room, fire pit, kid’s playground, and indoor game room.
The Inn at Seaside was built in 1981 and purchased by the sponsor in 2009. Since acquisition, the sponsor embarked on a capital improvement plan consisting of significant renovations to the guest rooms and lobby, including exterior upgrades completed in 2017.
“The challenge with financing any independent hotel is that generally CMBS lenders prefer to lend on franchised hotels,” said Dennis Suh, Senior Vice President at ValueXpress, who originated the Seaside Hotel Portfolio loan. “However, ValueXpress has successfully closed CMBS loans secured by independent hotels that are located in either core markets or destination coastal markets with strong performance. In this case the hotels are located in the latter.”
One inherent risk to the lender on coastal destination markets is “seasonality.” In such markets, lenders are concerned that in certain months of the year, the property does not generate sufficient cash flow to cover debt service payments. To mitigate this concern, a “seasonality reserve” is created in which the borrower is responsible for setting money aside in strong months to offset shortfalls during weak months.
“In this particular case, we had the rare opportunity during underwriting to increase the loan amount to fund the seasonality reserve,” commented Suh. “The sponsor was able to receive the full cash out that was expected and was very pleased with the overall process and results from the refinancing.”
For a loan quote on a similar transaction, contact Dennis Suh at 212-883-6487 or email him at firstname.lastname@example.org.