Peachtree Group Closes $46M C-PACE Loan for Palm Springs Hyatt Hotel
By Andrew Coen December 28, 2023 2:28 pm
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Hall Group has nabbed $46 million of Commercial Property Assessed Clean Energy (C-PACE) financing for its new Hyatt-branded hotel project in Palm Springs, Calif., Commercial Observer can first report.
Peachtree Group, formerly Stonehill, originated the C-PACE loan for Hall Group’s 168-key Thompson Palm Springs, which is slated to open in May. The financing, which is Peachtree Group’s largest C-PACE deal thus far, will cover costs associated with the lighting and plumbing, wiring along with building enhancements necessary to protect against potential earthquakes.
“It was a very complicated PACE loan because you had some work that was started and stopped and then new work that had to be done,” Jared Schlosser, Peachtree Group’s senior vice president, told CO.
Dallas-based Hall Group assumed ownership of the property in March 2020 at the onset of the COVID-19 pandemic after the previous owner, developer Lawrence Rael, defaulted on a $55 million construction loan provided by its lending platform, Hall Structured Finance. The original project under Rael would have been under Hyatt’s high-end Andaz brand.
Rael acquired the site in 2005 with plans to build condos, but hit delays stemming from the 2008 Global Financial Crisis. The City of Palm Springs later shifted to target a hotel instead in 2015 before legal battles ensued with subcontractors.
The $46 million C-PACE loan represents 34.5 percent of the stabilized appraised value of the hotel property at 414 North Palm Canyon Drive, and roughly 29 percent of the development costs, according to Peachtree Group. Property amenities will include a Middle Eastern restaurant, two outdoor pools, a fitness center and a wine tasting room.
“From a Palm Springs perspective, there isn’t a lot of branded supply there, and you have a lot of smaller key count boutique-type products,” Schlosser said. “This will be a really good brand for that market.”
Donald Braun, president of HALL Group, said in a statement that the project will “truly reflect, the style, vibrancy and luxury of Palm Springs..”
Despite challenging market conditions with higher interest rates, Peachtree Group finished 2023 with $250 million of C-PACE deals, up 20 percent from the previous year, according to Schlosser. He expects there to be more demand for C-PACE as part of the capital structure in 2024 because of the cost savings for property owners, and the advantages of property owners needing to fund only semi-annual property tax payments versus monthly debt service requirements.
“When you look at where mezz or preferred equity is pricing today, that’s generally in the 15 to 20 percent range,” said Schlosser, who noted that the Palm Springs C-PACE loan priced in the 8 percent range. “It’s a massive reduction in cost of capital to utilize pace in the scenario versus other products.”
Andrew Coen can be reached at acoen@commercialobserver.com
