Värde and Flynn Properties near $250M refi for 20 hotels in California

Värde Partners and Flynn Properties are nearing a $250 million deal to refinance a portfolio of 20 hotels in California. 

The debt is part of a broader commercial mortgage-backed securities package — $794 million in loans tied to 84 hotels across 21 states, according to a report from S&P Global Ratings. The deal is set to close at the end of the month. 

Deutsche Bank and Morgan Stanley originated the debt, which has an interest rate of about 8 percent and will mature in December 2026. 

All of the properties are managed by Highgate Hotels. Värde Partners and Flynn Properties bought an 80 percent stake in the portfolio from Highgate and Cerberus Capital Management last year for more than $1 billion. 

More than half of the hotels are limited service hotels — properties with few amenities and fewer staffers to provide cheaper rates, which allows the hotels to make a profit. The others are extended-stay hotels, which outperformed the overall hotel market in terms of occupancy in 2022. 

Two of the hotels are in Los Angeles County — the Courtyard Palmdale and Residence Inn Palmdale Lancaster — while eight are in Sacramento and two are located on the Central Coast. S&P did not list every property tied to the debt. 

Most of the other hotels are located in Texas, Nevada, Pennsylvania and Arizona. 

The new issuance is a bright spot for the CMBS market, as other hotel owners have defaulted on their debt and have struggled to find new financing. 

Over the summer, Park Hotels & Resorts stopped paying its $725 million mortgage on two of San Francisco’s largest hotels — the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco.

With debt more expensive, lenders have become more selective about assets they choose to back. 

Most new CMBS debt for hotels has gone towards luxury properties, switch as the Hotel del Coronado in San Diego, The Ritz-Carlton Dallas and the Four Seasons in both Palm Beach and Surfside.