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Recently opened 147-room AC Hotel San Diego
Downtown Gaslamp Quarter in California
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ATLANTA, GA – With
ongoing credit market dislocations, Peachtree Group originated a $40 million retroactive
CPACE loan to BLG SAN DIEGO, LLC (BLG) for its recently opened 147-room AC Hotel San Diego
Downtown Gaslamp Quarter in
Calif.
The Commercial Property Assessed Clean Energy
(CPACE) financing was amortized over 30 years and required no payment for a
year, followed by five years of interest-only payments.
Also, the proceeds
allowed BLG to pay down its senior loan with California-based Preferred Bank
and E.Sun Commercial Bank, Ltd. to under $20 million, thereby mitigating the
banks’ exposure.\
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Greg Friedman
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“This innovative capital structure significantly
alleviated the immediate financial pressures, enabling the hotel to establish a
solid cash flow foundation during its initial years of operation,” said Greg
Friedman, Peachtree Group’s managing principal and CEO.
Despite the U.S. hotel industry's strong RevPAR
performance, multiple headwinds exacerbate financial stress for owners. These
headwinds include the lagging profitability of U.S. hotels, persistently high
interest rates and historically high property insurance costs.
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Brad Honigfeld
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“When we opened the AC Hotel San Diego Downtown Gaslamp
Quarter in March 2023, there was a sizeable disconnect between hospitality
fundamentals, which are strong, particularly in San Diego, while the debt
markets were deteriorating meaningfully,” said Brad Honigfeld, founder,
chairman and co-CEO of the New Jersey-based Briad Group®. “The Fed’s tightening process and rising
fund rates drove up the cost of debt considerably.”
Hotel and commercial real estate owners face a tough few
years as trillions of dollars in debt come due, and refinancing gets harder,
compounded by banks' tightened lending standards.
According to JLL Research, by the end of 2024, $5.8 billion worth of
U.S. hotel-securitized loans will be due for repayment, requiring full payment,
refinancing, extension or sale. However, if these loans were refinanced at
current interest rates, most would struggle to generate enough income to cover
their debt costs.
In this challenging lending market, Commercial Property
Assessed Clean Energy (CPACE) financing has become a vital source of liquidity.
This option is growing in importance as owners face impending debt maturities
and scarce refinancing opportunities.
CPACE financing has rapidly gained traction in the
commercial real estate market, reaching a cumulative $7.2 billion in the U.S.
in just over a decade, according to PACENation.
This significant
milestone underscores the growing acceptance and adoption of CPACE financing as
an innovative and effective solution.
Peachtree Group, a key
player in this market, has demonstrated its commitment to CPACE financing, with
over $800 million in CPACE originations.
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| The AC Hotel San Diego Downtown Gaslamp Quarter |
The AC Hotel San Diego
Downtown Gaslamp Quarter is in downtown San Diego's Gaslamp Quarter, known
for its restaurants, shops and nightlife.
“Our hotel was benefiting from its location and
performing to its original underwriting, but the debt costs were straining cash
flows,” Honigfeld said.
Contact:
Charles Talbert
678-823
7683
ctalbert@peachtreegroup.com
Chris Daly
President
DG Public Relations
(703) 864-5553
chris@dalygray.com
www.dalygray.com
www.peachtreegroup.com.
