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Acquisition financing for middle market boutique hotel
The Challenge
Sponsor was acquiring a 280-key boutique hotel in downtown Austin off a distressed seller. Trailing RevPAR had recovered to 92% of 2019 levels but remained 8% below peer set. Lenders wanted stabilized cash flow; the thesis required underwriting a 24-month brand conversion and repositioning.
The Structure
Acquisition loan from a CMBS shelf at 55% LTV on T-12 NOI, structured with a PIP reserve and a brand conversion milestone that released additional proceeds on flag change. Priced at SOFR plus 325 bps with a 5-year term and two extensions.
The Outcome
Closed in parallel with the brand conversion negotiation. Repositioning completed on plan. Asset re-traded 22 months later at a valuation that returned 2.1x sponsor equity.
Deal Mechanics
Closed with brand conversion as a milestone unlock
PIP reserve structured outside the loan balance
Exit achieved 2.1x sponsor equity in 22 months
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