Why Lenders Are Hot for Hotel Construction Deals

Lenders are showing strong interest in hotel construction projects. BPM Real Estate Group has secured $115 million to build a 326-room, four-star Radisson Blu hotel in Anaheim in a deal that illustrates the robust capital interest for hotel projects. Lender demand is driven by strong hospitality as well as economic fundamentals. 3650 REIT funded the project, which is located adjacent to Disneyland.

“Lender demand is robust for well-located projects with great flags and strong ownership,” Malcolm Davies, principal and managing director at George Smith Partners, tells GlobeSt.com. “This interest is fueled by solid demand drivers in the hospitality sector as well as strength and stability in long-term economic fundamentals. Further, today’s lenders continue to demonstrate the liquidity required to fund these projects.” Davies secured the funding on behalf of the borrower along with VP Zachary Streit.

The Anaheim construction project generated significant lender interest, due both to the general demand for hotel projects as well as the particular characteristics of this deal. “We garnered significant lender interest in this project, particularly based on the asset’s exceptional location in the Disneyland submarket, which attracts over 28 million visitors per year,” says Davies. “These numbers are projected to increase in the years ahead, as Disneyland continues to invest in its park. Specifically, the $1 billion investment in Disney’s new Star Wars Land will have a tremendously positive impact on this project.”

In addition to the proximity to Disneyland, the property is located in a thriving micro-market that has recently seen revitalization. “Beyond the Disneyland Park, there has been significant investment and upgrades in the immediate vicinity, including a recent large-scale renovation of the Anaheim Convention Center, as well as considerable development in the Platinum Triangle,” says Davies. “This activity, combined with an extremely strong sponsor, created a very compelling lending opportunity.”

While there is strong lender demand for hotel projects, 3650 REIT has experience in the hospitality market, making it a strong choice for the deal. “The principals of 3650 REIT are industry veterans with deep hospitality lending experience as well as a long history of executing large non-recourse financing,” says Davies. “We have partnered with this team on previous financings, and knew they would immediately recognize the potential in the Disneyland submarket demand drivers and currently unmet demand for a four-star hotel product.”

Looking ahead, Davies anticipates continued demand for hotel deals, especially on the West Coast. “We are confident that the hospitality lending market will remain strong for hotel construction projects throughout the West coast, particularly for assets that address unmet demand in their respective markets,” he adds.