The Slatkin brothers, Edward and Thomas, have refinanced two of their marquee hotels in Santa Monica, with $400 million in new debt.
The Slatkins, who run Edward Thomas Collections, scored a $280 million loan to back the 198-key Shutters on the Beach and the 129-room Casa del Mar Hotel by the Sea, plus a $120 million mezzanine loan, according to a report from ratings agency Moody’s.
Edward Thomas was “thrilled to accomplish” the refinancing, Thomas Slatkin said in an email, adding the deal closed on Monday. Newmark’s Jonathan Firestone and Jordan Roeschlaub arranged the financing.
The deal is a boon for two of the highest-end resorts in Santa Monica, given the general pullback in commercial real estate lending.
But the hotels are two standouts, given the location — few hotels are built or redeveloped in Santa Monica, thanks to strict zoning and the fact that developers need approval from the California Coastal Commission. The redevelopment of the Fairmont Miramar Hotel, for example, has been in the works since 2013, but didn’t see a green light until 2022.
Citi Real Estate Funding originated the two-year senior loan, which is set to be sold off to investors through a commercial mortgage-backed securities deal. The floating-rate loan has an interest rate equal to the secured overnight financing rate — currently around 5.3 percent — plus 3.05 percent.
The Slatkins will be spared about two points on their actual rate, thanks to a rate cap on the loan at 6.3 percent.
The mezzanine loan was provided by a consortium of funds tied to Goldman Sachs, according to Moody’s and Slatkin.
The two-year mezzanine financing has an interest rate equal to the secured overnight financing rate plus 6.75 percent, or 9.8 percent. The borrower also has a rate cap on the mezzanine, which prevents the rate from exceeding 10 percent.
On the new debt, the Slatkins will be paying almost $2.5 million a month.
The Slatkins have owned both hotels for more than two decades, building the Shutters hotel in 1993 and redeveloping Casa del Mar in 1999. Both hotels were renovated in 2017. The two inherited a hotel development business from their family — their father Burt owned and operated the Beverly Hills Hotel from 1953 through 1986.
The new debt will replace $430 million in existing debt. Edward Thomas put $47.5 million towards the deal, to help repay the old debt and pay $17.5 million in closing costs.
The hotels, together valued at $605 million, according to a Cushman & Wakefield appraisal cited by Moody’s, are almost making what they were before the pandemic.
From May 2023 through May 2024, the properties were taking in $550 in revenue per available room, down from $566 in 2019, according to Moody’s.
The hotels are often listed for upwards of $1,000 a night, according to online booking sites.
The dip in recent average rates is partially due to a bad season last year, thanks to entertainment industry strikes and “unusually bad weather,” according to Moody’s.
Read more
Commercial
Los Angeles
Stockdale sues Mark Weinstein’s MJW over Santa Monica hotel ground lease
Commercial
Los Angeles
Coastal Commission approves Miramar redevelopment in Santa Monica