Smith Hill Capital, Bain Capital Provide $216M Refinance for Westin Grand Central

A joint venture between Smith Hill Capital and Bain Capital Special Situations has provided a $216 million refinance for Manhattan’s Westin New York Grand Central, Commercial Observer can first report. 

JLL’s Kevin Davis, Mark Fisher and Jillian Mariutti negotiated the deal on behalf of the hotel’s sponsor, which property records show as Davidson Kempner Capital Management. 

The 774-key hotel, at 212 East 42nd Street, sits in a prime position one block from Grand Central Terminal. Proceeds from the loan will assist with capital improvement work at the property. 

Davidson Kempner acquired the asset in 2019 from Host Hotels & Resorts for $302 million. Smith Hill Capital, led by Brendan McCormick, has an office at 100 Park Avenue, a mere stone’s throw away, and knows the neighborhood — and its draw — well.

“What made this transaction so attractive to us was its strong sponsorship,” McCormick told CO. “Westin is a very strong brand, and this a flagship hotel for the Marriott system and very well located on 42nd Street, just off Third Avenue. Another important part of the opportunity for us is you also have really attractive supply dynamics within this part of Manhattan — specifically the East Side, where a lot of hotels were actually taken offline permanently because they were converted to student housing or other uses. So, you have a really strong supply picture on this side of Manhattan as well.”

The Smith Hill-Bain Capital JV was formed in October 2023 to originate debt and preferred equity, and be a capital solutions provider, to companies and assets in the hospitality sector. It brings Smith Hill parent company Procaccianti Companies’ decades of experience in hotels  to the table as a competitive advantage. 

As such, although the lending playing field is competitive, the JV has plenty to offer that others don’t, said David DesPrez, a partner at Bain Capital.

“We’re focused on really high-quality assets and sponsors, most of whom have access to both the CMBS market and to relationship bank financing,” DesPrez said. “Our utility to those borrowers is providing a single-source, stretch-senior loan that would otherwise be filled with senior and mezz, and also more flexibility than CMBS, specifically in terms of prepayment flexibility.”

The deal, too, marks another milestone between JLL and the Westin New York Grand Central, said Kevin Davis, Americas CEO of JLL’s hotels and hospitality group. “This transaction not only provides our client with enhanced financial flexibility but also demonstrates the continued investor confidence in premier Manhattan hospitality assets.” 

Smith Hill’s McCormick was previously at Axonic Capital. He started the firm’s loan business alongside Matt Weinstein, focused largely on mezzanine debt and first mortgage opportunities. It was there that he first met the Procaccianti Companies team, and executed three deals with them. The stars aligned when Procaccianti wanted to start a lending arm focused on hospitality and needed someone to lead it, and the JV with Bain Capital followed shortly thereafter. 

Coming out of COVID, market conditions were ripe for the new platform to gather steam quickly and fill a lending void. 

“It  was our observation that liquidity was draining from commercial real estate broadly, but in hotels more than any other category as a function of the severity of COVID shutdowns on hotels — so we felt the opportunity there was really compelling,” DesPrez said. “We saw opportunities to provide solutions to sponsors and assets that weren’t as readily available to us previously. So, we set out saying, ‘What’s the right way to do this?’ and given the highly specialized nature of hospitality as an asset class, we thought it made sense to work with an expert in owning and managing hotels. And we were fortunate enough to utilize Procaccianti’s underwriting capabilities and perspectives, given their very large hotel portfolio.”  

With the Westin deal wrapped, the JV is looking at several opportunities both inside and outside of New York.  “We’re actively looking at a number of those opportunities,” McCormick said. “What spoke to us about New York was the strong supply picture, where you’ve had hotels come offline as well as the depletion of Airbnb. That’s all helped buttress the market. We generally have a favorable view of New York, but it was also very specific to this asset as well.” 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.