Borrowers Locking in Long-Term Low Interest Loans
First mortgage debt was secured by Sonnenblick-Eichner Company to refinance the Lone Star Court, a 123-room boutique hotel located within The Domain, a 303-acre master planned development.
AUSTIN, TX—First mortgage debt was recently secured to refinance the Lone Star Court, a 123-room boutique hotel located within The Domain, a 303-acre master-planned development. The CMBS loan, funded by a Wall Street investment firm and arranged by Sonnenblick-Eichner Company, pays 3.49% interest only over the entire 10-year term. Loan proceeds were utilized to retire existing debt and provide working capital.
“The lower cost of capital on this interest-only loan will help the borrower to manage his cash flows in this extremely difficult environment,” David Sonnenblick, a principal of Sonnenblick-Eichner Company, tells GlobeSt.com.
Hotel amenities include The Water Trough restaurant and bar, 1,933 square feet of meeting space, 3,341 square feet of outdoor event space, a fitness center, swimming pool and 154 parking spaces. Lone Star Court is ranked seventh out of 216 hotels in Austin on TripAdvisor.
“We are seeing many of our clients paying off existing debt and the prepayment associated with the refinancing in order to obtain new long-term low interest rate financing,” adds Elliot Eichner, also a principal of Sonnenblick-Eichner Company. “Depending on the remaining term of the existing loan, the savings in debt service typically pay for the prepayment premium in the early years of the new loan. Refinancing also mitigates the risk of potentially higher interest rates when their existing loan matures.”
The CMBS industry has annually accounted for approximately 10% of the mortgage debt outstanding to the multifamily industry since its inception in 1995, according to the National Multi-Housing Council 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 faced strong headwinds due to the departure of many market participants and from the volume of regulatory red tape placed on the industry, NMHC says.
“There is a tremendous amount of capital in the market for all types of commercial properties. We received 21 bids on this financing opportunity from life insurance companies, debt funds, REITs and CMBS capital providers,” said Sonnenblick. “The ability to obtain a full-term interest-only loan at a competitive credit spread resulted in our client ultimately deciding to execute on a CMBS financing. This is the third hotel that we have financed in Austin, including the Austin Archer and Aloft Austin, both located within the Domain.”