Continental Partners successfully arranged the $37,500,000 refinance of the Galleria Park hotel in San Francisco, CA.

Transaction Details

Loan Amount: $37,500,000
Rate: Floating at SOFR + 4.25% with a 1.50% SOFR Floor
Term: 3 Years, Two 12-Month Extensions
LTV: 73% Initial / 65% Stabilized
Debt Yield: 4.00% In / 11.0% Out
Guaranty: Non-Recourse
Lender Origination Fee: 1% no exit fee

Ryan Foster

Transaction Description

Summary: Continental Partners successfully arranged the $37,500,000 refinance of the Galleria Park hotel in San Francisco, CA. The Sponsor requested a floating-rate, non-recourse loan to refinance the existing CMBS loan and provide an interest reserve to stabilize the Hotel. Most Lenders at the time were requiring cash in refi (Sponsor would need to put in fresh cash to refi the loan).

Opportunity: A number of Lenders who quoted the transaction were coming up with a loan amount that did not meet the Sponsor’s requirements (the loan amount wasn’t high enough to refi the existing balance). The Covid pandemic caused a swift upheaval in the city’s economic landscape. San Francisco was one of the first major cities in the United States to enact policies to curb the spread of COVID-19. In March 2020, San Francisco and five other Bay Area counties implemented a “shelter-in-place” order for all residents. In response, more than 70% of hotels in the city temporarily suspended operations because of the lack of demand. By the end of the year, hotels in the San Francisco-San Mateo market averaged a RevPAR of $74.11 according to STR, a roughly 64% decline from peak 2019 levels.

Result: Continental found a Lender who understood the business plan and believed in the San Francisco hotel market. The Lender lowered their in place debt yield 4% which was unheard of for a hotel at that time allowing for a loan amount to replace the existing CMBS loan and provide enough interest reserve and time to stabilized the Hotel. Continental completed a market survey using the STR report to confirm the market occupancy, daily rates and ADR’s for the comp set. Based on the Continental Partners survey, the Lender was able to get comfortable with the deal and committed to a larger loan amount than originally requested.