New Residence Inn in California Receives $41M Loan

Residence Inn by Marriott Walnut Creek. Image courtesy of Sonnenblick-Eichner Co.

Despite having just opened with no operating history, the latest Residence Inn in Walnut Creek, Calif., has secured mortgage financing with the help of Sonnenblick-Eichner. The non-recourse LIBOR-based loan was funded when the extended-stay hotel finished construction and opened. The loan was for $40.5 million, according to the lender ACORE Capital, and the borrower was a group led by RevPAR Cos., according to a Commercial Real Estate Direct report.

Having just opened in December, the 160-key Residence Inn by Marriott Walnut Creek offers its guests a breakfast dining area, 870 square feet of meeting space, an indoor pool, a fitness room, outdoor patio and barbecue areas and parking for 144 cars. The six-story Residence Inn, located at 2050 N. California Blvd., is also nearby the Walnut Creek BART station that connects to San Francisco and the rest of the Bay Area.

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Elliot Eichner, principal at Sonnenblick-Eichner, said the company has financed many hotels as they complete construction or those with limited operating history. With the Residence Inn by Marriott Walnut Creek, the 77 percent loan-to-cost loan with a credit spread in the low 300s over LIBOR, gave the borrower cash equity and relieved them of recourse from the construction loan.

Hotels With No History

Even though the hotel just opened, Sonnenblick-Eichner Principal Patrick Brown added that there were competitive bids for a mortgage loan.

Eichner told Commercial Property Executive that financing these new hotels tends to be difficult as lenders want to see at least 12 months of operating history. However, the firm was able to arrange the financing for the Residence Inn due to the company’s experience, the market the Residence Inn was in and the abundance of liquidity in the hotel market.

“We have been successful in financing hotels upon completion of construction, consequently with no operating history, in good/healthy markets with high occupancies,” Eichner told CPE. “Lenders are attracted to these types of deals because they view the risk profile as low, meaning that they believe, given the micro market dynamics, that these hotels they are financing will ramp up quickly to stabilization where they can be refinanced into a long-term fixed-rate loan.”