Dealmaker: Continental Partners Sources $21M for Disneyland-Area Hotel

Continental Partners, Los Angeles, secured $20.5 million in fixed-rate refinancing for the Sheraton Garden Grove-Anaheim South Hotel, a 285-room hotel near the Disneyland theme park.

Continental Partners President Mitch Paskover arranged the financing for the property at 12221 Harbor Boulevard in Garden Grove, Calif.

The five-year fixed-rate loan in the low 5 percent range was sized to 65 percent of cost with a 30-year amortization schedule and a 1.40 debt coverage ratio, Paskover said.

“The Orange County hotel sector is experiencing remarkable growth and outperforming other U.S. markets,” Paskover said. “Driven by a thriving tourism industry, the region’s hotel market continues to demonstrate annual revenue per available room growth and occupancy rates that are above national averages.”

Paskover noted that based on these healthy fundamentals, “there is strong investment activity and sustained lender appetite for quality hotels with high average daily rates throughout Orange County.”

CBRE Hotels projected that average daily rates in Orange County will increase 3.5 percent in 2017. Market occupancies average 77 percent, outpacing the 65.4 percent national average.

Located two miles away from Disneyland, the Sheraton Garden Grove-South Anaheim Hotel has 285 rooms within a 186,000 square-foot, seven-floor building on 3.1 acres. 

Paskover said the sponsor requested a fixed-rate non-recourse loan to refinance the hotel and pay off a mezzanine loan. He said several lenders returned loan amounts that did not meet the sponsor’s requirements for a mezzanine loan payoff.

“Most lenders were sizing to debt yields around 11.5 to 12 percent and were skeptical of the asset’s strength based on the 12 months of historical operating statements and the quick ramp-up in net operating income,” Paskover said, so Continental Partners broadened the scope of capital sources to source the most competitive rates. “By communicating the strength of this asset and the demand in this market, we were able to secure a lender who was comfortable enough with the deal to lower the debt yield below 10.5 percent and commit a larger loan amount than originally requested,” he said.