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NEW BRAUNFELS, TX-A 130-room hotel with an 11 1/8% fixed-rate loan and a $1.2-million pre-payment penalty didn’t deter a New Jersey investor from closing the deal. The Succasunna NJ investor has paid $3.23 million for the 22-year-old Rodeway Inn.

Park & Kim Inc. assumed a loan with a prepayment penalty that drops sharply in 4.5 years, according to Greer Lee, senior investment adviser with Sperry Van Ness, who represented the seller, Sweet Water Alpha LP of Houston. He tells GlobeSt.com that the buyer plans to refinance the 1209 Interstate 35 East asset when the time comes.

The Houston broker says the seller took over the hotel in 1989, but was losing revenue and it required renovation. “The seller thought it was better to offer it on the market and let someone else renovate it and improve the revenue,” he adds.

Because of the loan assumption and stiff pre-payment penalty, the hotel’s listing didn’t bring out buyers in droves. But Greer says the buyer, which was represented by Steve Blue of Scoggin Blue LLC in Las Cruces, NM, is willing to put at least $350,000 into improving the hotel, which has an average occupancy of 58%, slightly above the market rate.

Lee believes the investment should ultimately pay off for the buyer. For one thing, the hotel’s average daily room rate is $47.30, offering strong upside potential because it’s well below the market rate. “The property has the best location for a hotel in New Braunfels,” Lee says, “and the buyer saw it as an opportunity to renovate it and build revenue.”

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