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Continental Partners Arranges $54 Mil in Refinancing for the Ritz Carlton Rancho Mirage

4/03/17

Continental Partners has secured $54 mil in fixed-rate, non-recourse, interest-only refinancing for the Ritz-Carlton Rancho Mirage, a 244-room luxury resort in the Inland Empire city of Rancho Mirage. The property is located 68900 Frank Sinatra Dr, just off Hwy 111, about 10 miles southeast of Palm Springs.

The financing was arranged by Continental Partners President Mitch Paskover, who tells us, “When it comes to financing hotels, many lenders remain somewhat conservative and are hesitant to advance higher leverage loans. The hotel sector has demonstrated steady growth over the past several years, yet some lenders believe that the market is reaching its peak as occupancies stabilize and average daily rates moderate. That said, while some capital sources are tightening their underwriting standards, there is still strong lender appetite for well-located hotels with solid financials and high ADRs.”

The sponsor, a private real estate investor and developer, had requested an interest only, fixed-rate, non-recourse loan to replace the maturing construction loan to buy out their existing partner in the deal.

The Ritz-Carlton resort represents one component of an expansive mixed-use project that was to be developed in two separate phases. The first phase included the renovation and conversion of an existing hotel into a luxury resort and the addition of 16 for-sale residences.

“Despite the strength of this asset, many lenders were quoting a loan amount that did not meet the sponsor’s requirements,” continues Paskover. “Most of the lenders were sizing loan amounts with debt yields between 10% to 11%, based on the last 12 months of historical operating statements.”

“Additionally, the borrower requested a loan that would exclude the existing 16 condos and the Phase II land parcel, which were secured by the original construction loan. The challenge was that most lenders were unable to release the existing condos and phase II land from the existing collateral due to the homeowner’s association, which controls access to the hotel, condos, and land,” adds Paskover.

Continental Partners approached a number of lenders including banks, CMBS lenders, and life insurance companies and broadened the scope of capital sources. The firm also completed a methodical market survey to confirm the market’s occupancy and average daily rates for comps in the area. Based on this comprehensive survey, the lender was able to commit to a larger loan amount than originally requested, according to Paskover.

“By demonstrating the strength of the asset, the market, and the sponsor’s business plan, we were able to source a lender that would lower the debt yield below 9.5%, providing a loan amount that met the borrower’s objectives,” confirms Paskover. The lender also agreed to release the existing condos and Phase II from the new loan.






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