Commercial Property Executive
April 16, 2012
By Barbra Murray, Contributing Editor
Innisfree Hotels has received $57 million in financing for three of its hotels along the Gulf Coast in Florida and Alabama, and it happened in a nick of time. With the assistance of Aries Capital, the hotel company obtained the CMBS loan just weeks in advance of maturity dates on loans for the three assets.
Two of the hotels, the 137-room Hilton Garden Inn and the 119-room Holiday Inn Express, front the Gulf of Mexico in Orange Beach, Ala. The third hotel in the group is the 181-room Hampton Inn in Pensacola Beach, Fla. It took Aries just 32 days to arrange the 10-year non-recourse loan at a loan-to-value ratio below 65 percent. Innisfree used the majority of the proceeds to refinance the existing debt, and the company set aside an additional cash sum for its seasonality reserves.
Despite being a hotelier with a portfolio of properties in a beach vacation market that has not fully recovered from the negative perception created by 2010’s Deepwater Horizon oil, Innisfree had other financing options before it turned to Aries for assistance in securing the best financing deal available. The financial entity holding the original loans offered Innisfree a refinancing package, as did a second lender. However, the hotel company, with maturity dates fast approaching, rolled the dice with Aries and walked away with a loan featuring a better interest rate, as well as a greater amount of cash.
“We were impressed with Innisfree Hotels’ leadership and properties,” Neil D. Freeman, chairman and CEO of Aries, said. “And with the oil spill in the rearview mirror, they capitalized on an improving Gulf Coast market. We aggressively pursued the deal because we felt confident that we could overcome its complexity and secure an attractive financing solution.”
The fact that Innisfree had choices for refinancing its three loans is also indicative of the current lending climate. As per a report by commercial real estate services firm Jones Lang LaSalle Inc., CMBS loans account for approximately one-third of outstanding hotel debt in the U.S. and with a large amount of loans scheduled to mature in 2012, a period of highly attractive investment opportunities has emerged for investors who are confident in the continued rebound of the hotel sector. “
All of the signs point in the direction of a strong recovery for the lending market,” Mathew Comfort, an executive vice president with JLL, notes in the report. “The hotel sector is moving in the right direction with bank lending driving activity and CMBS lending