Unlocking Sustainable Financing: C-PACE Loans Fuel Hospitality Revitalization in Los Angeles

In a strategic move, a joint venture between Machine Investment Group and Taconic Capital Advisors has secured .4 million in retroactive Commercial Property Assessed Clean Energy (C-PACE) financing to recapitalize two adjacent Hyatt-branded hotels in Los Angeles. This innovative financing solution, provided by Nuveen Green Capital (NGC), has enabled the sponsors to refinance existing construction debt and address critical building improvements, paving the way for the continued success of these hospitality assets.

Unlocking Sustainable Financing for Hospitality Revitalization

Leveraging C-PACE for Competitive Advantage

The .4 million C-PACE financing package secured by Machine Investment Group and Taconic Capital Advisors represents a significant milestone in the growing adoption of this innovative financing tool. Cory Jubran, senior director of originations at NGC, highlighted the key benefits of C-PACE for the sponsors, noting that it allowed them to "dramatically" lower the cost of capital needed to tackle necessary upgrades while also continuing to execute their business plans for the two hotels.Unlike traditional refinancing options, C-PACE debt offered the sponsors more favorable terms, particularly in the current high-interest-rate environment. Jubran explained that C-PACE can be a valuable solution for assets transitioning from construction loans to long-term financing, providing attractive economics and enabling the sponsors to effectively implement their strategic vision.

Retroactive C-PACE Financing: A Game-Changer for California

The ability to utilize retroactive C-PACE financing in California has been a significant advantage for the sponsors and NGC. Jubran highlighted that California's C-PACE program is the most advanced in the country, featuring a mechanism that allows property owners to access this financing even after the completion of a construction project or renovation.This retroactive financing capability has enabled the sponsors to use the C-PACE loan proceeds to pay down past debt, cover project overruns, or address existing capital needs. Jubran noted that the state's incentives for incorporating green energy measures have further strengthened the appeal of C-PACE financing, creating a "happy marriage" between developers and the program.

Expanding C-PACE Adoption in Hospitality

The successful C-PACE financing for the Thompson Hollywood and Tommie Hollywood hotels underscores the growing prominence of this financing tool in the hospitality sector. Jubran revealed that NGC has closed over 0 million in C-PACE loans on the West Coast alone since he joined the company nine months ago, and the pipeline of deals with institutional partners is expected to continue expanding through 2024.This trend reflects the broader recognition of C-PACE as a versatile and long-term financing solution, moving beyond its historical use for smaller retrofit projects. The ability to leverage C-PACE for larger-scale recapitalizations, as demonstrated in this case, highlights the growing maturity and adaptability of the program.

Hyatt-Branded Hospitality Gems in Los Angeles

The two hotels at the center of this C-PACE financing deal are prime examples of the hospitality industry's resilience and evolution. The 190-key Thompson Hollywood, which debuted in August 2021, boasts a range of amenities, including a rooftop lounge, a restaurant, and a pool deck, catering to the discerning tastes of modern travelers.Similarly, the 212-room Tommie Hollywood, which opened in December 2021, offers a diverse array of amenities, such as a lobby café, a fitness center, a rooftop Mexican restaurant, a rooftop bar, and a pool deck. These properties, strategically located in the heart of Los Angeles, are poised to capitalize on the city's vibrant tourism and business travel sectors.The successful recapitalization of these Hyatt-branded hotels through C-PACE financing underscores the growing appeal of sustainable and innovative financing solutions in the hospitality industry. As the market continues to evolve, the ability to access flexible and cost-effective financing options like C-PACE will be crucial for hotel owners and operators to maintain a competitive edge and drive long-term growth.