ROSEMONT, IL-Locally based First Hospitality Group has obtained just under $32.2 million in first-mortgage funding to re-capitalize a three-property portfolio. It will use approximately $2.4 million of the loan proceeds to renovate the properties.
They are the 117-room Hampton Inn & Suites in South Bend, IN, which was built in 1996; a 130-room Hampton Inn in Ann Arbor, MI, which was built in 1988, and an 84-room TownePlace Suites in Bloomington, IN, which opened in 2000. FHG developed and manages all three assets.
The properties are primarily located in college towns, which provide a steady base of demand. The South Bend property is a mile north of Notre Dame, St. Mary's College and Holy Cross. The Bloomington asset is two miles west of the Indiana University campus.
The lender is Columbus, OH-based RockBridge Capital LLC. James T. Merkel, RockBrige's managing director, and Gavin Freytag, VP, participated in the transaction. Freytag tells GlobeSt.com that RockBridge had acquired the Holiday Inn Select here and turned its management over to FHG in 2003. "They've done an excellent job with it," he says, "and that led to a broadening of our relationship."
He declined to disclose the loan term and rate. "FHG used the proceeds to pay off an existing loan, but a re-capitalization, rather than a refinancing, takes a bigger step, allowing the owner to get additional money for renovations and perhaps take a little off the table," he says. "We're providing what we're comfortable with based on the properties' performance." The funding is a single loan, Freytag says, "cross-collateralized and cross-defaulted over all three properties."
"RockBridge helped us to look at these assets in a new way," Robert Habeeb, president of FHG, tells GlobeSt.com. "By recapitalizing, we were able to unlock the full value of these hotels without disposing of the assets." Renovation of TownPlace Suites is already under way, he says, and renovation of the other two will take place in the fourth quarter of this year. "They are major re-dos, including a change out of carpeting, draperies, wallpaper, mattresses and TVs and appliances in all guest rooms."
Stephen Schwartz founded FHG in 1985 as a real estate investment, development and management company focused on the hospitality industry. Since then, the FHG portfolio has grown to encompass 30 properties in six states under such brands as Marriott, Hilton and Holiday Inn.
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