Indiana Hotel Portfolio.

We arranged a $13.9 million CMBS conduit loan to refinance two franchised hotels in Indianapolis and Scottsburg, Indiana. The Hampton Inn – Scottsburg is a 4-story, 86-room hotel constructed in 2000. The hotel is located 80 miles south of Indianapolis and 30 miles north of Louisville, Kentucky. A portion of the loan proceeds will be utilized to complete a Forever Young Initiative (FYI) property improvement plan in conjunction with a 15-year franchise renewal. The Staybridge Suites – Indianapolis/Fishers is a 4-story, 146-room extended-stay hotel constructed in 2000. The hotel is in the highly desirable neighborhood of Fishers, 10 miles northeast of downtown Indianapolis. This property is in the final stages of a property improvement plan related to a franchise renewal.

Both assets have historically solid performance, but the Sponsor faced almost insurmountable challenges to refinancing the Hampton Inn hotel because he was in loan maturity default and filed for Chapter 11 bankruptcy. The Sponsor was in maturity default due to a sizeable outstanding judgment against him related to a separate transaction that was settled during Bankruptcy. The Bankruptcy enabled the Sponsor to keep the property out of receivership and provide time to settle the judgment but created significant hurdles in getting the new loan approved. We structured around this concern by sizing the loan to meet very conservative debt metrics, including cash management, seasonality reserves, and property improvement reserves, to ensure the properties were properly capitalized. It was paramount to make the Special Servicer whole as they exited the Bankruptcy proceeding, costs of which were covered by defeasing the Staybridge Suites and using both assets as collateral for the new loan. The CMBS loan extinguished the loan maturity default and property bankruptcy for the Hampton Inn, and we defeased the Staybridge hotel to provide the proceeds for the Hampton property improvement plan.

Although highly complex to structure, CMBS was the only capital solution available to save the Sponsor’s hotels. The CMBS loan provided by an investment bank featured a 10-year term, 25-year amortization, is non-recourse, and included PIP reserves for planned FF&E. The transaction was originated by Dennis Suh, as SVP at ValueXpress.