Aries Capital Arranges $57 Million CMBS Loan for Gulf Coast Hotels in Just 32 Days

Financing Highlights:

Gulf Coast Hotels
  • Closed in 32 Days
  • Permanent Refinance
  • 64% LTV
  • 10-Year Non-Recourse CMBS Loan
  • Equity out to Borrower
  • Pensacola, FL
  • Orange Beach, AL
  • Gulf Coast Hotels

 

 

Just weeks from an upcoming maturity date on three of its properties, Borrower Innisfree Hotels chose to pass up two existing financing packages for a compelling offer from Aries Capital.  Despite the tremendous risk of not closing the loan by end-of-month, Innisfree chose Aries’ option due to Aries’ reputation in the hospitality field, the volume of hotel loans Aries has closed, and the strength and expertise of Aries’ capital partners.  The loan closed in a record 32 days and provided the borrower with a 10-year non-recourse loan with a loan-to-value ratio below 65% to refinance the existing debt and fund seasonality reserves. The loan also provided substantial cash back to Innisfree, and enabled the land lease encumbered as collateral by the existing lender to be released back to Innisfree clear of debt.

The Project:

Innisfree Hotels, owner and operator of more than a dozen major-brand and independent hotels in the southeastern United States, faced maturing loans on three properties in March of 2012.

The properties, a Hilton Garden Inn and Holiday Inn Express in Orange Beach, Alabama and a Hampton Inn in Pensacola Beach, Florida, were all located on the Gulf of Mexico, in an area widely esteemed as a vacation destination for families within the region. One of the properties was on a land lease. In addition, all three properties were situated along major interstate highways, and were popular with both business and leisure travelers.  They were well maintained and managed, and all were profitable enterprises.  Innisfree’s leadership wished to refinance the existing loans, as well as receive cash out of the assets to finance additional projects.

The original lender prepared a package which would allow Innisfree to refinance the existing debt, but the rate was not as competitive as the borrower expected, and did not provide for any equity out of the deal. A second lender, representing a large, multinational institution, presented Innisfree with a package that featured a more attractive interest rate and some cash out of the deal, but the borrower was reluctant to partner with such a large organization.

In January, Innisfree Founder and CEO Julian MacQueen met Aries Capital CEO Neil Freeman and Senior Vice President Jeffrey Bucaro at the Americas Lodging and Investment Summit (ALIS), and explained his situation.

The Challenge:

Securing financing for hotels in the Gulf Coast has been a challenging endeavor due to the negative Gulf Coast Hotelsimpact of the Deepwater Horizon oil spill of 2010.  Many hotels along the Gulf experienced significant cancellations and occupancy declines due to the perception that area was tainted by the spill, although most of the beaches remained pristine, and showed no physical impact.

Conduit lenders were also burdened by significant maturing debt, and the possibility of securing financing on such short notice seemed slim.

Moreover, with just weeks left on the clock, Innisfree already had two viable options. If Innisfree selected Aries, a failure to close within the limited timeframe would put the company in maturity default. Nonetheless, Bucaro immediately recognized an opportunity to assist and offered to source an alternative proposal for the refinance for the company’s comparison.

The Capital Structure:

“We were impressed with Innisfree Hotels’ leadership and properties.   And with the oil spill in the rearview mirror, they capitalized on an improving Gulf Coast market.  We aggressively pursued the deal because we felt confident that we could overcome its complexity and secure an attractive financing solution.  We welcome the opportunity to work with Innisfree Hotels again in the future.” said Freeman.

Thanks to Aries Capital’s close relationship with the executive team of a nimble Gulf Coast Hotelsconduit lender, Bucaro was able to get swift approval on a term sheet. “We were able to bring a very compelling offer to the table in just two days,” said Bucaro.

The loan provided the borrower with a 10-year non-recourse loan with a loan-to-value ratio below 65% to refinance the existing debt and fund seasonality reserves. The loan also provided substantial cash back to Innisfree, and enabled some additional property encumbered as collateral by the existing lender to be released back to Innisfree clear of debt.

The Successful Outcome:

In addition to offering the most attractive terms, Innisfree found that Aries Capital came highly recommended by several mutual acquaintances, and bore a similarity in spirit and structure to Innisfree’s own company, giving the borrower the confidence to trust Aries with the refinance despite the other options.

The loan was finalized just 32 days from application.

“We were very skeptical about Aries’ ability to close a loan of this size and complexity with multiple brands and properties located in two different states in the time required,” said MacQueen. “Aries delivered and fulfilled their term sheet outline without exception and in record time. We are very pleased that we were fortunate enough to have Aries Capital represent Innisfree Hotels.”

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