Hall Group has scored a $46 million clean-energy financing deal for its new Hyatt hotel in Palm Springs.
The Dallas-based investor secured the Commercial Property Assessed Clean Energy debt for its Thompson Palm Springs Hotel at 414 North Palm Canyon Drive, the Commercial Observer reported.
Atlanta-based Peachtree Group, formerly Stonehill, originated the C-PACE money for the 168-room hotel scheduled to open in May.
The financing, Peachtree’s largest C-PACE deal, will cover the cost of lighting, plumbing, wiring and safeguards against potential earthquakes.
“It was a very complicated PACE loan because you had some work that was started and stopped and then new work that had to be done,” Jared Schlosser, senior vice president for Peachtree Group, told the Observer.
C-PACE allows building owners to borrow at low rates to make energy upgrades. Rising interest rates have heightened interest in the green financing program, which differs from other types of alternative financing, according to The Real Deal.
The financing provides money to a property owner for both big and small energy-efficiency improvements — from new windows to retrofits to gut renovations. C-PACE is not technically a loan, but a property tax assessment at a fixed rate and paid back over time.
Hall Group assumed ownership of the Palm Springs property in March 2020 at the dawn of the pandemic after its original developer, Lawrence Rael, defaulted on a $55 million construction loan provided by its lending platform, Hall Structured Finance.
The initial project by Rael would have been under Hyatt’s high-end Andaz brand.
Rael bought the site in 2005 for an undisclosed price, with plans to build condos, but that stalled during the Great Recession. In 2015, the City of Palm Springs pointed the project toward a hotel before legal battles ensued with subcontractors.
The $46 million C-PACE obligation represents 34.5 percent of the stabilized appraised value of the hotel property, and 29 percent of the development costs, according to Peachtree Group.
Highlights of the Mid-century Modern-style hotel will include a Middle Eastern restaurant, two outdoor pools, a fitness center and a wine tasting room.
“From a Palm Springs perspective, there isn’t a lot of branded supply there, and you have a lot of smaller key count boutique-type products,” Schlosser told the Observer. “This will be a really good brand for that market.”
Despite challenging market conditions with higher interest rates, Peachtree Group finished 2023 with $250 million of C-PACE deals, up 20 percent from the previous year, according to Schlosser.
He predicts more demand for C-PACE financing next year because of the cost savings for property owners, with the advantages of semi-annual property tax payments compared to monthly debt service requirements.
— Dana Bartholomew
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