Lone Star Court Lone StarCourt is a 123-room boutique hotel located within TheDomain.

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AUSTIN, TX—First mortgage debt was recently secured to refinancethe Lone Star Court, a 123-room boutique hotel located within TheDomain, a 303-acre master-planned development. The CMBS loan,funded by a Wall Street investment firm and arranged bySonnenblick-Eichner Company, pays 3.49% interest only over theentire 10-year term. Loan proceeds were utilized to retire existingdebt and provide working capital.

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"The lower cost of capital on this interest-only loan will helpthe borrower to manage his cash flows in this extremely difficultenvironment," David Sonnenblick, a principal of Sonnenblick-EichnerCompany, tells GlobeSt.com.

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Hotel amenities include The Water Trough restaurant and bar,1,933 square feet of meeting space, 3,341 square feet of outdoorevent space, a fitness center, swimming pool and 154 parkingspaces.  Lone Star Court is ranked seventh out of 216hotels in Austin on TripAdvisor.

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"We are seeing many of our clients paying off existing debt andthe prepayment associated with the refinancing in order to obtainnew long-term low interest rate financing," adds Elliot Eichner,also a principal of Sonnenblick-Eichner Company. "Depending on theremaining term of the existing loan, the savings in debt servicetypically pay for the prepayment premium in the early years of thenew loan.  Refinancing also mitigates the risk ofpotentially higher interest rates when their existing loanmatures."

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The CMBS industry has annually accounted for approximately 10%of the mortgage debt outstanding to the multifamily industry sinceits inception in 1995, according to the National Multi-HousingCouncil This peaked in 2007 at nearly 17% of the total debt market,but has now fallen to less than 7%. That's because CMBS has facedstrong headwinds due to the departure of many market participantsand from the volume of regulatory red tape placed on the industry,NMHC says.

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"There is a tremendous amount of capital in the market for alltypes of commercial properties. We received 21 bids on thisfinancing opportunity from life insurance companies, debt funds,REITs and CMBS capital providers," said Sonnenblick. "The abilityto obtain a full-term interest-only loan at a competitive creditspread resulted in our client ultimately deciding to execute on aCMBS financing. This is the third hotel that we have financed inAustin, including the Austin Archer and Aloft Austin, both locatedwithin the Domain."

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Lisa Brown

Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.