Edition Six
GREEN SHOOTS
Welcome to THG's regular series where we bring you hopeful glimmers and brighter outcomes, saving properties for CMBS Borrowers.
LOS ANGELES HOTEL
FROM HOUSING THE HOMELESS TO PREMIUM VALUE
ICYMI: Part I - We originally brought you the story about our client, a L.A. Boutique Hotel Owner, and the daunting challenges he faced due to COVID. The story continues - Part II details our ongoing relationship and the 11th hour uncertainties and outcome. Read on!

PART I
A lauded community philanthropist and prominent businessman owns a 95-room, full-service hotel located in downtown L.A. When COVID hit in March 2020, occupancy was decimated, dropping from 90% occupancy to 15% occupancy in less than 30 days. Faced with significant cash flow deficits, the Owner was forced to shutter the hotel and close a very popular on-site restaurant.

IT TAKES A VILLAGE
With a long history of successfully owning and managing hotel and resort properties, the Owner recognized COVID-19 as an unprecedented, exogenous event. With a stellar loan repayment track record, there was never a need to negotiate with a Master or Special Servicer. But with 40+ years of experience and a pending distressed CMBS loan, the Owner was compelled to seek bench strength.

George Smith Partners, a leading national real estate capital advisory firm based in L.A. referred us to the Owner. GSP's Hospitality Team specializes in hotel and resort investment sales and financing in North America.

Rather than choose between using his long-term real estate attorney or hiring a CMBS Loan Restructuring Firm like The Henley Group, he hired BOTH. The collaboration proved quite fruitful in resolving the legal and financial challenges that mounted over the next six months.

RELIEF FOR BOUTIQUE HOTEL
After multiple months of negotiations with the Master Servicer and several threats by the Lender to move the loan to Special Servicing, we struck a deal.

  • The Lender consented to the Payroll Protection Plan (PPP) so the Owner could obtain the funds needed to maintain critical employees at the hotel and to pay key operating expenses.

  • The Lender consented to the closing of the hotel and accepted a federally funded Emergency Occupancy Agreement that allowed the homeless (non-COVID-19) to take shelter at the Property.

  • The Borrower was allowed to access 4 months of the FFE reserve to make monthly P & I loan payments. The Lender waived 6 months of FFE deposits and extended the payback period 9 months.

KEEP PUSHING FORWARD
PART II
The Borrower managed to convince the County of Los Angeles to extend their short term lease for a second term; the total lease term was 13+ months in total. The hotel's occupancy slowly increased. And yet, without the cash flow generated by the County of L.A. lease, the Property would have been in deficit.

The Borrower was able to live up to the terms of the previously negotiated Forbearance Agreement. By September, the Borrower was able to get back on track and pay the loan's P&I out of the Property's cash flow.

THE BLOOM IS OFF THE ROSE
Early in our engagement, and perhaps accelerated by the pandemic, the Owner revealed that he had owned the hotel "long enough.” Dealing with the rigors of day-to-day operations and a full-service restaurant was taking its toll. Ultimately, his goal was to sell the hotel and invest in a less management-intensive asset class.

As the loan was getting close to maturity, defeasance for the loan was minimal. The Owner saw 2021 as a ripe opportunity to sell. With the hotel's return to profitability and the property in meticulous condition, this iconic hotel attracted a buyer...willing to pay a hefty premium.

GREENER PASTURES
During the closing process, THG remain engaged and assisted the Owner in navigating several critical hurdles that had the potential to derail the sale. Determined to finalize the deal, our client still needed to get the Lender to approve his second PPP loan. However, due to a massive backlog at the Special Servicer, it was extremely difficult to get anyone's attention.

At the 11th hour, THG was able to get on the phone with the Head of Servicing. On the spot, he moved the documentation through. In ONE DAY, the approval was granted. Icing on the cake: the Owner was not charged any additional fee by the Servicer, only the customary processing fee.
🌱
GREEN SHOOT The Henley Group was honored to be part of a professional team that worked tirelessly to provide creative solutions and sufficient stop gap measures for the L.A. hotel to re-open and generate positive cash flow. With persistence and additional pathways to profitability, the Owner's ultimate goal of selling the property could be realized. We are extremely proud of the deep relationships we have forged over decades, and remain grateful to our colleagues and clients who continue to consider us trusted advisors.
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Call David Goldfisher 617.320.0284