ARC Hospitality Trust Borrows $232 Million to Repay Old Hotel Portfolio Buy Loan
American Realty Capital Hospitality Trust Inc., a non-traded real estate investment trust sponsored by AR Capital, has entered into a loan agreement with Ladder Capital Finance LLC and German American Capital Corporation to borrow $232 million. The loan has a maturity date in October 2020 and is at a fixed annual interest rate of 4.96 percent per annum.
The new loan provides for monthly payments of interest only with all principal outstanding due on the maturity date. The new loan is secured by first mortgages on the company’s fee interest in 21 hotel properties, including 20 hotels that were part of the 116-hotel portfolio acquired by the company in February 2015 and one additional hotel that was part of the six-property portfolio acquired by the company in March 2014.
Proceeds from the new loan were used to repay a $227 million loan incurred by the REIT in February 2015, which was secured by first mortgages on the same 21 hotels, bore a floating interest rate that could be no less than 6.25 percent per annum and had a maturity date in March 2017.
According to an SEC filing, the new loan is generally not prepayable by ARC Hospitality during a lock-out period that will expire no earlier than Oct. 6, 2017 and no later than Dec. 31, 2017. After the lock-out period, the REIT has the right to prepay the entire new loan, subject to the payment of a yield maintenance premium to the lenders and the satisfaction of other customary conditions. After the lock-out period, the borrowers also have the right, in connection with a sale of one or more hotels to a third party purchaser, to prepay a portion of the loan equal to a release price of not less than 115 perent of the allocated loan amount of the hotels sold, subject to the payment of a yield maintenance premium to the lenders and the satisfaction of other customary conditions.
As part of the new loan, $10 million of property improvement plan reserves were deposited into an escrow account to fund PIP expenditures required by the franchisors at the collateral hotels, which amount represented the PIP reserves that were on deposit pursuant to the old loan when it was repaid.
The borrowers also agreed to deposit an additional $27.5 million into the PIP reserves in incremental installments.
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