NEWPORT BEACH, CA—GlobeSt.com has learned exclusively that Lone Oak Fund has provided financing for three separate California hotel properties, including the Newport Beachwalk Hotel here. The loans were for both acquisitions and refinancing purposes for properties with a combined total of 140 rooms.
Lone Oak partnered with two other lenders to provide financing for the $7.1-million acquisition of a pool of investment properties here that included the 16-room boutique Newport Beachwalk Hotel, which features a ground-floor restaurant, quadruplex and beachside cottage. Lone Oak provided a $3.6-million first trust deed, at a rate of 8.3% interest-only for a six-month term. In addition, the firm sourced a junior lender that provided the second trust deed, while a third trust deed from a private-equity investor rounded out the capital stack. All three loans closed concurrently in less than two weeks.
Also, Lone Oak provided a $3.9-million first-trust deed on Civic Center Inn, an 82-room hotel valued at $8.2 million on a 24,300-square-foot lot in the Russian Hill neighborhood in San Francisco. The 18-month loan closed at a rate of 8.3%. “The borrower acquired this property in 2004, and there is an existing lease in place with an operator,” says Alexa Mizrahi of Lone Oak. “By providing this short-term refinance loan, we were able to help the borrower become better positioned to pay off the property’s existing liens and seek a conventional refinance while rates remain low.”
Lastly, Lone Oak provided a $3.4-million first-trust deed on America’s Best Inn, a 12,059-square-foot, 42-room hotel, also in Russian Hill. The 18-month loan closed at 8.3%. The borrower, who acquired the property in 1994 and is the current operator of the hotel, will use the short-term loan to ensure that all of the property’s liens are paid to prepare for a conventional refinance. Mizrahi says that we will likely see an increase in short-term refinance loans over the next 12 to 24 months as investors continue to work toward conventional refinance loans in order to take advantage of continued low rates.
According to Mizrahi, “Private money lending activity is beginning to soar in the hospitality industry. Hotel owners and investors are seeking alternative finance solutions that can deliver the flexibility and speed they need to acquire and reposition hotel properties.”
Mizrahi tells GlobeSt.com that conventional financing options can take longer to close than the bridge loans that her firm provides, which gives buyers the advantages of speed and the ability to make higher offers in order to win the deal. “Sellers that are motivated to get properties off their books quickly are interested in buyers who can put in a more competitive offer and close in a short amount of time.”
As GlobeSt.com reported in March, Lone Oak Fund ended 2013 with $378 million in bridge loans, an increase of 8.67% over the previous year. In total, the private lending fund, which specializes in short-term loans with no prepayment penalties, completed 844 bridge loans in 2013.
Stay tuned for an exclusive interview with Alexa Mizrahi where she discusses trends in hotel trading and the acquisition strategies buyers are using to purchase hotels.