Related’s Palm Beach hotel financing challenge

May.May 30, 2013 11:00 AM

Acquiring financing for a Related Group deal on proposed 400-room West Palm Beach Hilton hotel could be trickier than anticipated depending on the outcome of a June 4 meeting of Palm Beach County commissioners, South Florida Business Journal reported.

Related hopes commissioners will reduce its responsibility for operating the convention hotel from the life of its lease to only seven years, the Journal reported. The county also hopes to avoid ponying up $47 million of the $100 million project, including a $20 million guarantee on the developer’s senior debt, instead providing $27 million, the Journal said.

“The elimination of the county’s mortgage guarantee, along with the requirement for Related to guarantee that the hotel would stay operational for up to 98 years, created a significant financing challenge for the developer,” the Journal said, quoting the county agenda item summary. “To overcome these financial challenges, Related requested that the operational guarantee be reduced to a period of seven years after execution of the agreements.”

The lender would then have to shoulder the senior debt if Related defaults, a scenario that would permit the county to revoke the lease. Such possibilities could make it difficult for the developer to find a lender willing to take the risk, the Journal said. [South Florida Business Journal]Emily Schmall

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