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5/27/25
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A McKinney Capital entity secured a $6 mil bridge loan one the Hermosa Hotel & Apartments on Southern California’s Catalina Island. The loan proceeds will retire existing debt at the century-old property, located at 131-171 Metropol
Hermosa Hotel & Apartments contains 46 buildings encompassing 44 hotel rooms, a commercial unit occupied by a spa, and 26 multifamily units. Since acquiring the asset in 2019, the sponsor has invested approximately $3 mil into renovations, reorienting the hotel as a boutique alternative to large-scale resorts while maintaining the multifamily component as stable, year-round housing for service workers.
Deryl Deese at Tauro Capital Advisors Inc arranged the financing. David Christensen, Thomas Gorski and James Myatt. Led the team at Red Oak Capital Holdings, who provided the loan, which will retire existing debt at the century-old property. The interest-only loan was structured under Red Oak’s Core-Plus Bridge Loan Program and carries a two-year initial term and an LTSV of 55.24%.
“Properties like the Hermosa Hotel & Apartments offer a rare mix of character, history, and reliable income from both hospitality and housing operations,” said Christensen. “The sponsor’s strategic investments have already transformed this site into a differentiated boutique destination with a loyal visitor base and ongoing upside.”
Additional capital—fully self-funded by the sponsor—will target two premium, ocean-facing rooms with upgraded kitchens, bathrooms, and furnishings. These improvements are designed to boost ADR and occupancy without interrupting current operations.
“Avalon’s unique position as a coastal tourism hub with limited land availability gives this property a durable competitive advantage,” added Red Oak’s CEO, Gary Bechtel. “The dual-use nature of the Hermosa Hotel & Apartments—balancing short-term tourist lodging with year-round workforce housing—offers both upside and resiliency and aligns well with Red Oak’s value-focused lending approach.”
In addition to the physical upgrades, the sponsor has launched an enhanced marketing campaign positioning Avalon and the Hermosa Hotel as a domestic alternative to international resort destinations, such as those in Mexico and the Caribbean. Combined with broader business development efforts, these initiatives are expected to drive visitation and revenue growth in the years ahead. The borrower anticipates either refinancing the Red Oak loan with permanent debt or pursuing a strategic sale following the completion of the remaining renovations and continued operational improvement.
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