Continental Partners successfully arranged a $54,000,000 full term, interest-only loan to refinance the Ritz-Carlton, Rancho Mirage.

Transaction Details

Loan Amount: $54,000,000
Rate: Low 5’s
Term: Fixed – 5 years
Amortization: All 5 Years Interest-Only
LTV: 60%
DCR: 1.50
Prepayment: Defeasance
Recourse: Non-Recourse
Lender Origination Fee: Par

Mitch Paskover

Transaction Description

Summary: Continental Partners successfully arranged a $54,000,000 full term, interest-only loan to refinance the Ritz-Carlton, Rancho Mirage. The Sponsor requested a fixed-rate, non-recourse, interest-only loan to refinance an existing construction loan and payoff a partner in the deal. The Ritz-Carlton Resort represents one component of an expansive, multi-phase mixed-use project that was developed in Rancho Mirage, California. Phase I of the mixed-used project includes the conversion of an existing hotel to a 264-room luxury resort associated with the Ritz-Carlton brand. The resort previously operated as The Lodge at Rancho Mirage Resort which was subsequently closed for the conversion to a Ritz-Carlton flag. The renovation included 100% of the existing structures.

Opportunity: Continental Partners approached a number of Lenders with this request including banks, CMBS lenders and life insurance companies. A number of Lenders who quoted the transaction was coming up with a loan amount that did not meet the Sponsor’s requirement for a partner buyout. Most Lenders were sizing to debt yields around 10.5-11% and were skeptical of asset’s strength based on the 12 months of historical operating statements and the quick ramp-up in NOI. Additionally, the Borrower requested the loan to exclude the condos and Phase II land, which was part of the original collateral. The HOA controlled the entire resort which made the request to omit the additional collateral difficult to accommodate.

Result: Continental Partners was able to source a Lender who understood the asset, the market and the Sponsor’s business plan. The Lender lowered its debt yield below 10% allowing for a loan amount to replace the existing construction loan and provided enough cash out to meet the Sponsor’s requirements. Continental found a Lender that understood the HOA and figured out a solution to carve out the condos and Phase II land. Continental also conducted an extensive market survey using a STAR Report to confirm the market occupancy, daily rates and ADR’s for the comparable set. Based on Continental Partners’ survey, the Lender was able to get comfortable with the deal and committed to a larger loan amount than originally requested, meeting all of the Borrower’s objectives.