Phoenix-based structured finance firm, Tower Capital, recently arranged a $5,900,000 acquisition loan on behalf of a Toronto-based hotel group to acquire a 122 room Comfort Inn in Phoenix. The property is located off of the I-10 Freeway and W. 51st Avenue and is the site of a major freeway expansion that will connect the I-10 and 202 freeways. ADOT recently purchased two hotels in the vicinity that will be demolished to make way for the 202 freeway extension, causing 200 rooms of hotel inventory to be removed.
The 3-story limited service hotel was purchased for $6.3 million, or $51,430/key, and will undergo a $1.1 million dollar renovation that will include extensive upgrades throughout the rooms, interior corridors, lobby, meeting room, business center, exercise room, and pool area.
The $5.9 million dollar loan secured by Tower Capital represents approximately 80% of the total cost and was broken up into two separate loans with the same lender. The property was purchased with a $4.8 million bridge acquisition loan based on a 36 month term. The loan included 18 months of interest only payments followed by a 25 year amortization schedule and was secured by a first deed of trust on the building and land. The second $1.1 million Capex loan was based on an 84 month fully amortizing term which included 12 months of interest only payments and was secured by the FF&E at the property.
Commenting on the transaction, Kyle McDonough, principal at Tower said, “The freeway expansion at this location, which is already a busy trucking route, presents an amazing investment opportunity for our client, who also owns another property nearby. As we reach the end of the year, we are experiencing that many conventional lenders are full on hospitality allocations, making financing this asset class more challenging than others. For this transaction we utilized an east coast based finance company that specializes only in hotels after we were turned away by some of our more traditional sources.”