Arriba Capital (Arriba) successfully closed a loan to finance the discounted note payoff for a Quality Inn hotel located in Springfield, IL. This new loan allowed the sponsorship to lock-in attractive long-term financing and capitalize on a deep discount being offered by the existing lender. Arriba structured this $3,100,000 loan to include a large renovation budget, which enabled the borrower to complete the necessary property improvement plan (PIP). The borrower is a privately held, Illinois-based hospitality management company.

Challenge: There were a number of rooms currently offline due to years of deferred maintenance and lack of liquidity to make the necessary renovations. Having these rooms offline affected the overall operating profit of the hotel, which was barely breaking even under the current debt structure. The sponsorship had some credit issues due to the downturn in the economy in 2008. Lastly, the hotel property required major renovations to maintain in good standing with the existing hotel flag.

Solution: Arriba helped structure a complicated discounted payoff from the existing bank who inherited the loan from a now-defunct financial institution. By structuring this deal and allowing this bank to recapture their cost basis for the loan, it was a win / win for all parties involved. Due to the discounted payoff and new debt structure, the in-place cash flow, and historical cash-flow could now adequately service the debt at a comfortable DSCR ratio. With the historical cash-flow issue resolved, the bank was comfortable lending additional dollars to complete the much-needed renovations on the property. The $3,100,000, 25 year fully amortizing the loan, was fixed for the first 5 years at 5.5%.