Developer Scores $20M in Construction, EB-5 Funds to Redevelop Hotel
Shaffin Jetha’s MVH Baltimore Hotels closed an approximately $14 million construction and acquisition loan, as well as $6 million in so-called EB-5 funds, to buy and redevelop a historic hotel in the Mount Vernon section of Baltimore, Mortgage Observer has first learned.
The Baltimore-based developer closed the mortgage, from Virginia Heritage Bank, last Thursday.
At the moment, the five-story Mount Vernon Hotel, an aged but sturdy building, per reviews on Yelp, occupies 24 Franklin Street. “You know how you see an older person who dresses well and looks good even at their advanced age? Well, that’s kind of how I felt about this place,” one review reads. MVH intends to revamp the hotel under the Indigo Hotel brand, according to Barry Dollman of Eastern Union Funding, who brokered the deal with colleague Marc Tropp. MVH just bought the building for $6.3 million, he said.
The loan has a six-year term, a rate of 300 basis points over the 30-day Libor and is interest only for 24 months, Mr. Dollman said.
The Indigo brand is franchised by InterContinental Hotels Group, which owns or manages more than 4,700 hotels in 100 countries.
“The Hotel Indigo Baltimore location will be a boutique hotel experience designed to reflect the culture, character and history of the surrounding Mount Vernon neighborhood,” Mr. Jetha said in a statement. “The story of the neighborhood will be woven throughout the guest experience—from the locally sourced food and drinks served in the restaurant and bar to the art, photography and architecture incorporated into the hotel’s design.”
The project will utilize EB-5 funds from an entity called Oriental Dolphins Investments, a “regional center” that sources low-cost funds from Chinese investors, Mr. Dollman confirmed. He said using the novel financing program, which allows investors providing capital for some job-creating real estate projects in the U.S. to receive green cards, was the developer’s idea.
“[Mr. Jetha] has done a lot of tax credit deals. He always looks for a different source of funding,” said Mr. Dollman. The federal EB-5 program allows investors to come to the U.S. and provides nearly no-cost capital to developers whose projects qualify.
“Financing is at below-market rates, because EB-5 investors are looking to the green card benefits as their principal compensation for investment,” said Kate Weaver, a C.P.A. and manager of ODI, in a statement. “This is one of the first EB-5 investment funded projects in Baltimore, but our company has plans for several apartments, offices and assisted living projects in Baltimore and the District of Columbia.”
The project should be complete by 2015.
Mr. Jetha’s previous experience includes developing the Hampton Inn and Suites, also in Baltimore.