A joint venture between Machine Investment Group and Taconic Capital Advisors has landed $90.4 million of retroactive Commercial Property Assessed Clean Energy (C-PACE) financing for the recapitalization of two adjacent Hyatt-branded hotels in Los Angeles, Commercial Observer can first report.
Nuveen Green Capital (NGC) provided a $49 million C-PACE loan on the sponsorship’s Thompson Hollywood hotel and $41.4 million of C-PACE financing for its Tommie Hollywood property. Proceeds from the debt package were used to refinance existing construction debt on both hotels while also addressing building improvements.
Cory Jubran, senior director, originations at NGC, said the transaction enabled Machine and Taconic to “dramatically” lower the cost of capital needed to tackle necessary upgrades while also continuing to march forward with both hotels’ business plans through the loan’s 30-year term. He noted that C-PACE debt afforded the sponsorship more favorable terms than a traditional refinance given how high interest rates are now.
“C-PACE can be a solution to assets which are coming out of either a construction loan or looking for bridge to long-term financing,” Jubran told CO. “They’re moving from a construction loan to a long-term loan, and we were able to provide them with attractive economics, as well as long-term paper that allowed them to effectuate their business plan.”
Located at 1541 Wilcox Avenue, the 190-key Thompson Hollywood debuted in August 2021. Property amenities include a rooftop lounge called Bar Lis, The Terrace restaurant and a pool deck.
The 212-room Tommie Hollywood at 6516 Selma Avenue opened in December 2021. Its amenities include a lobby café, a fitness center, a rooftop Mexican restaurant named Ka’teen, a rooftop bar and a pool deck.
The combined $90.4 million of C-PACE deals closed for the hotels underscores the sharp growth of these loans as a long-term financing tool, and not just for smaller retrofit deals that the debt was formerly mostly utilized for, according to Jubran, who was previously a construction lender at Bank OZK. Jubran said NGC has closed more than $200 million of C-PACE loans on the West Coast alone since he joined nine months ago and there is a large pipeline of deals lined up with institutional partners to be executed throughout the remainder of 2024.
Jubran said NGC has benefited from California’s C-PACE program being the most advanced in the country and featuring a mechanism that allows property owners to utilize C-PACE debt retroactively following the completion of a construction project or renovation. He noted that proceeds from retroactive C-PACE loans in California can be used to pay down past debt, cover project overruns or address existing capital needs.
“In California you are incentivized to put in green energy measures, which allows us to provide that financing to those developers which becomes a happy marriage,” Jubron said. “In some places it’s harder to build and you have to put in a lot of energy resiliency and energy-efficient projects to achieve entitlements, and C-PACE is the carrot to help you facilitate and build that.”
The NGC L.A. C-PACE deal for Machine and Taconic came on the heels of Peachtree Group also closing a retroactive C-PACE hospitality loan of $40 million for Briad Group’s newly opened Marriott hotel in San Diego.
Officials at Machine Investment Group did not immediately return a request for comment. Taconic declined to comment.
Andrew Coen can be reached at acoen@commercialobserver.com