Thorofare Capital has funded a $12.65 million floating rate commercial mortgage for the acquisition of the Hilton Garden Inn St. Louis Shiloh/O’Fallon. Located 17 miles east of St. Louis, Missouri, the 2008-built property presented a unique opportunity for the sponsor to acquire a well-performing, cash-flowing asset with strong upside. The 128-room hotel benefits from good visibility along Interstate 64, where over 70,000 vehicles pass by the property on a daily basis. Nearby demand generators such as Scott Air Force base, downtown sports & entertainment venues, and a high density of large hospitals has made the Hilton Garden Inn an attractive asset from the time it was built.

After another debt fund was unable to close the transaction due to internal constraints, the sponsor sought certainty of execution from a reliable balance sheet lender. With only 45 days left to close on the purchase, after an expired due diligence period, the sponsor turned to Thorofare for a timely loan funding.

The sponsor can exercise an option to purchase the leasehold interest in an adjacent, physically-connected 20,000 SF conference center. Thorofare was able to structure an innovative up-sizing feature, available to call down subject to cash-flow hurdles similar to a line of credit. A commitment fee was not charged at the time of the initial loan closing. If the up-sizing is not exercised, then no unnecessary costs are incurred. This flexibility allows the sponsor to benefit from a reliable source of capital to fund a leasehold mortgage on the conference center, should the sponsor choose to exercise its option in the future.

The non-recourse, interest-only financing was sized to 76% of total project capitalization. The floating rate loan carries an initial term of two years, includes three, one-year extension options and was priced at a competitive spread over LIBOR. Additionally, the structure included a PIP Holdback to fully capitalize the sponsor’s value-add business plan.

The sponsor is a private equity firm focused on hotel real estate acquisitions and asset management. Headquartered in Washington, D.C., the sponsor owns and manages 12 hotels throughout the Midwest, Northeast, and Southeast United States. OTO Development, LLC was retained as the third party hotel management group for this project.