02/10/2012

Rockpoint Scrambling to Refinance SF Hotel

As vulture investors circle, a Rockpoint Group partnership is negotiating with Wells Fargo, Blackstone and other players to line up enough capital to refinance an overleveraged hotel near Union Square in San Francisco.

The 1,013-room property, called Parc 55 Wyndham, has $211.5 million of outstanding debt that matured yesterday. The Rockpoint team is trying to pay it off by lining up a $90 million senior mortgage, $60 million of mezzanine debt and $50 million of preferred equity. It would also kick in about $10 million of fresh equity itself.

Wells appeared to have the inside track on the senior mortgage this week, although a final agreement hadnít been reached. Blackstone has tentatively committed to fund the mezzanine loan, contingent on the rest of the package being completed. The preferred equity evidently still hasnít been placed.

The senior and mezzanine debt would likely have floating rates and three-year terms. Eastdil Secured is advising the Rockpoint team.

As Rockpoint scrambles to arrange fresh financing, high-yield investors are jockeying to buy the existing junior mezzanine debt on the hotel, in order to position themselves to take a run at the property if the refinancing fails. Market pros value the hotel at $210 million to $220 million, meaning that the Rockpoint team has little or no equity remaining in the property.

Rockpoint, a Boston fund operator, teamed up with Highgate Holdings of Dallas in December 2006 to buy the hotel, then called the Renaissance Parc 55, for $220 million, or $218,000/room. They spent another $30 million on an extensive renovation. The duo financed the purchase and renovation with a $213.4 million debt package arranged by Deutsche Bank in February 2007. The package had a two-year term, with three one-year extension options. Deutsche securitized the $67.6 million A-note via a $2.5 billion pooled offering (COMM, 2007-FL14). The package also included $57.4 million of B-notes and $88.4 million of mezzanine debt. The balance of the A-note has paid down by almost $2 million.

The hotel, at 55 Cyril Magnin Street, generated $8.9 million of net operating income in 2010, when the average occupancy rate was 90%, according to a servicer report. More-recent figures were unavailable, but the income has likely risen because San Franciscoís hotel market is surging. Last year, revenue per room soared by 19.7% ó the fastest growth rate in the nation ó to $122.54, according to Smith Travel Research.

The upper-upscale hotel operated without a flag until 2010, when it took the Wyndham brand. Among its amenities are a fitness center and an upscale restaurant. The renovation included a reconfiguration of the lobby and an expansion of the meeting facilities to 30,000 square feet.

The Rockpoint team tried unsuccessfully to sell the hotel late last year via Eastdil.

Back Print