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Stonehill Improves Access To Alternative Financing

Wednesday, October 02, 2019
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ATLANTA—Stonehill today announced that it has increased its alternative financing capabilities for hotel projects. Year-to-date, the company has provided over $450 million in financing to 20 projects nationwide.

“There is a genuine lack of capital and an inefficient market when completing the capital stack for construction/value-add financing,” said Mat Crosswy, principal, Stonehill. “While it is much easier for conventional, stabilized deals to find money, hoteliers looking for additional capital to meet loan requirements are having a much harder going. To address that demand, Stonehill has been expanding further into alternative gap financing. Our ability to provide everything from mezzanine financing and preferred equity to Property Assessed Clean Energy (PACE) has allowed numerous projects to come to fruition with rates and structures that have benefitted all parties.”

The following deals exemplify the types of alternate gap financing that Stonehill is providing:

Mezzanine Lending

Stonehill provided $4 million of mezzanine capital to an affiliate of Ascent Hospitality for the conversion of the Chattanoogan Hotel to the Curio Collection by Hilton in Tenn. The borrower required certainty of execution with a hard close date and additional capital necessary to complete the renovation.

“The Chattanoogan is the fourth project that Stonehill has financed for Ascent within the past two years, and we continue to work with them due to their ability to seamlessly execute on creative financing solutions,” said John Tampa, president and co-founder, Ascent Hospitality. “Banks are tightening up now, making it very challenging to find certain types of equity. Stonehill was able to quickly assess our needs and provide the lending knowledge and capital to make this conversion a reality.”

Preferred Equity

Stonehill delivered a preferred equity investment in five hotels owned by the Briad Group. The preferred equity provided capital necessary for the sponsor to continue its growth strategy by leveraging the value created in on-going and recently completed development projects.

“We set very aggressive growth goals for our company but were in need of additional equity to accomplish them,” said Brad Honigfeld, founder and co-CEO, Briad Group. “Fortunately, Stonehill had faith in our development and operational track records and worked with us to find the financial solution that best fit our needs. The Stonehill team is extremely knowledgeable about locating and placing alternate gap financing that allowed us to significantly increase our presence in the New York tri-state area by adding five new hotels to our portfolio.”

PACE Financing

Stonehill provided a $3.5 million PACE loan at a 6.15 percent fixed rate for 20 years to refinance The Broadway Columbia – A DoubleTree Hotel by Hilton in Missouri and replaced more expensive mezzanine debt that was accruing during construction. Shortly after construction was completed, PACE, a relatively new financing alternative, became available in Columbia. By virtue of adhering to brand standards, the project met the state’s PACE program qualifications. Like most state programs, Missouri allows PACE to be used retroactively, even following construction completion.

“PACE financing is yet another arrow in our quiver to provide affordable gap financing for hoteliers in need of additional financing,” Crosswy added. “Realizing the overwhelming need for this type of complex financing was why we launched the division earlier this year. While the terms of these types of loans can be complicated, Anne Hill, who leads the team, is second to none in her ability to complete these transactions both quickly and affordably.”

Record Year

“We are on pace to provide over $600 million in financing in 2019,” Crosswy stated. “Both hoteliers and Wall Street financiers realize that industry fundamentals remain strong, creating further demand for new construction. By providing these additional pieces to the capital stack, Stonehill is able to help hoteliers meet market demand as it continues to grow across the country.”
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