M&T Realty Capital Lends $76M for Hotel-to-Multifamily Conversion Projects

GoodHomes Communities and investment partner Pilot Real Estate Group has landed $76.2 million of bridge debt to refinance properties that have been converted from hotels to multifamily assets, Commercial Observer has learned.

M&T Realty Capital Corporation (M&T RCC) provided the loan for the sponsorship’s 886-unit portfolio spread across Detroit; Fayetteville, N.C.; Groton, Conn.; and Warwick, R.I. The loan will refinance existing first-lien debt and preferred equity to help complete the lease-up process across the portfolio.

“This was an existing M&T Bank client that we had worked with for a long time, and they came to us looking for a platform or product that could allow these assets to stabilize further, which is what our bridge is really set up for,” Robert Barry, senior vice president at M&T RCC, told CO. “With our bridge platform, this fit the box well of having a group of multifamily assets with some tax abatements.”

The portfolio features GoodHomes Cedar Creek and GoodHomes Bordeaux in Fayetteville; GoodHomes Groton; GoodHomes Detroit; and the Presley Apartments in Warwick. 

Barry noted that all of the properties, with the exception of GoodHomes Groton, benefit from local tax abatement programs with rents limited based on area median incomes. The borrowers that developed the multifamily projects at former extended-stay hotel sites over the last five years will now use the bridge loan to boost the properties’ net operating income to position the portfolio for permanent debt, according to Barry.

GoodHomes and Pilot have experience with hotel-to-multifamily conversions, having acquired 2,000 units for similar projects over the years. 

“Our mission is to breathe new life into underutilized properties and deliver attainable, high-quality housing options for working families nationwide,” Adam Feldman, managing partner at GoodHomes, said in a statement. “This financing enables us to complete lease-up and stabilization while further advancing our commitment to expanding affordable housing opportunities in communities that need it most.”

Steve McGuire, head of bridge lending, at M&T RCC said there is “runway” in the market for additional conversions of extended-stay hotel locations to multifamily use because of the high demand for rental hosting across the U.S. McGuire credited GoodHomes with being “ahead” of this trend and positioned to execute more of these repurposing projects. 

McGuire, who joined M&T RCC on May after 10 years at M&T Bank to help expand its bridge lending capacity, said the GoodHomes deal fits well with the platform with loans above $20 million that enable sponsors to meet business goals. M&T RCC is targeting experienced multifamily owners looking to complete lease-ups or to rehabilitate older acquired assets. 

“We play in this sweet spot where we compete with a moderate-leverage product that is appealing to many of the sponsors,” McGuire said. “It’s not the highest leverage, but it is well-priced, moderate leverage and we’ve had a lot of traction.” 

Andrew Coen can be reached at acoen@commercialobserver.com.