Square Mile Purchases $32M in Mezz Debt on Lightstone’s NoMad Moxy Hotel
Square Mile Capital Management has acquired a $31.8 million mezzanine loan from a subsidiary of Marriott International for financing the development of Lightstone Group’s planned Marriott Moxy Hotel project at 105-109 West 28th Street, Square Mile announced today.
The mezzanine debt was originated in December 2016 as part of a $101.8 million financing package for the hotel project, between Avenue of the Americas and Seventh Avenue. At the time of the deal, Bank of the Ozarks provided Lightstone with $53 million in construction financing and also assumed a $17 million mortgage that Banco Inbursa had provided the developer on the property in November 2015, as Commercial Observer previously reported. The $31.8 million mezzanine portion—and the Marriott International subsidiary that provided it—went undisclosed at that time.
The Lightstone Group acquired the NoMad site in July 2014 and broke ground in April 2016.
“For the Moxy’s, in particular, we really liked Lightstone as a sponsor. It’s a talented developer and its buildings are thoughtfully designed,” Square Mile Principal of Investments, Mike Lavipour told Commercial Observer. “With the Moxy’s, it’s a continuation of a trend of efficient rooms with larger common area space.”
The NoMad hotel will include 349 guest rooms spread over 37 stories. Designed by Stonehill & Taylor, the building will feature a lounge in the lobby, a ground-floor market restaurant, a fitness center, meeting rooms, a rooftop dining and a bar. Although Marriott’s Moxy website said it was slated to open in late 2017, it is now expected to open its doors sometime in 2018, according to the news release.
The Lightstone Group is developing five Moxy Hotels in partnership with Marriott International in New York City. In November 2017, CO reported that Goldman Sachs provided Lightstone with a $262.2 million financing package for the company’s repositioning of its 618-key, flagship Moxy Hotel at 485 Seventh Avenue in Times Square. The new financing for the Times Square project provided a $57.2 million gap mortgage and consolidated a previous $205 million construction loan made by Square Mile in January 2016, as CO previously reported.
Property records show that Lightstone acquired the 16-story Times Square former office property between West 36th and West 37th Streets in 2014 for $182 million.
Square Mile has proved to be a reliable player in the Moxy Hotel scene. In total, the firm provided $330 million in financing to Lightstone in January 2016 for the Times Square Moxy, CO reported at the time, comprising the previously consolidated $205 million construction loan and $125 million in additional capital provided by two unnamed institutional investors.
“Before entering any new segment of a market, we like to dip our toes on the credit side, and on these deals, we’re at roughly 60 percent loan-to-cost and less than 300,000 per key,” Lavipour said. “In New York, specifically, we plan on being active on the debt side in the hotel space. There’s a lot of supply coming online and we’d rather not take a bet on the equity side. We want to play in the space on a discounted basis. We think lenders have pulled back more than they should have in New York, and we also like the low leverage points we can get in at.”
Lightstone also filed plans with the New York City Department of Buildings in September 2016 for a 13-story, 311-key Moxy at 112 East 11th Street between Third and Fourth Avenues, that’s expected to open late this year. Marriott’s website highlights the opening of two additional Moxy’s—one Downtown and one on the Lower East Side (both slated to open sometime this year).
“Our acquisition of the mezzanine loan on this project was a logical renewal of our relationship with Lightstone after we successfully exited our investment in the development of the Moxy New York Times Square,” Square Mile Vice President Eric Cohen said in a statement in today’s press release, detailing the debt purchase. “We believe the Moxy NoMad, once complete, will be well positioned to leverage its central location, strong food and beverage department, and the Moxy brand to appeal to modern travelers.”
The Lightstone Group did not immediately respond to a request for comment.