Slatkin Brothers Refinance Luxury Hotels in Santa Monica

Slatkin Brothers Refinance Santa Monica Luxury Hotels with $400M

The Slatkin brothers, Edward and Thomas, have successfully refinanced their two prestigious hotels in Santa Monica, Shutters on the Beach and Casa del Mar, securing a total of $400 million in new debt. This includes a $280 million loan along with a $120 million mezzanine loan, a significant financial move arranged by Newmark’s Jonathan Firestone and Jordan Roeschlaub, and completed recently. The new financing replaces $430 million in existing debt and presents a rate cap that effectively saves the Slatkins nearly two points on their interest rate. With the hotels, valued at $605 million, making a swift rebound in revenues approaching pre-pandemic levels, this refinancing marks a considerable achievement, especially in the current state of commercial real estate lending and Santa Monica's stringent development regulations.

Key Takeaways

• The Slatkin brothers have secured $400 million in new debt for their luxury hotels in Santa Monica.
• Shutters on the Beach and Casa del Mar have been refinanced with a $280 million senior loan and a $120 million mezzanine loan.
• The hotels, valued at $605 million, are experiencing a notable recovery in revenue per room, nearing pre-pandemic levels.
• The refinancing incorporates interest rate caps of 6.3% and 10% for the senior and mezzanine loans, respectively.
• The monthly debt service amounts to nearly $2.5 million.

Analysis

The decision by the Slatkin brothers to refinance their Santa Monica hotels in the current commercial real estate market demonstrates shrewd financial management. This strategic move yields reduced interest costs and stabilizes debt service, paramount in an environment governed by strict development regulations. Notably, this maneuver not only enhances the hotels' short-term operational flexibility but also strengthens their competitive positioning. Furthermore, the refinancing sets the stage for potential investor interest, potentially leading to strategic acquisitions or expansions, while highlighting Newmark's influential role in high-stakes real estate financing. It also represents a mitigated risk for lenders given the hotels' robust revenue recovery.

Did You Know?

• Mezzanine Loan: A mezzanine loan represents a hybrid form of financing, combining aspects of debt and equity, commonly utilized in real estate transactions. It holds a repayment priority after senior debt but before equity and typically carries a higher interest rate due to its intermediary risk profile.
• Rate Cap: A rate cap serves as a financial safeguard to restrict the interest rate on a variable rate loan. In this context, it shields the borrowers, the Slatkin brothers, against significant interest rate hikes.
• Debt Service: This denotes the financial flow required to cover the repayment of interest and principal on a debt within a specific period. In this scenario, the monthly debt service of nearly $2.5 million reflects the monthly obligation of the Slatkin brothers to service their loans.