DoubleTree Berkeley Marina Faces Imminent Default

Berkeley’s largest hotel and biggest waterfront tenant is headed toward default, according to Morningstar. The $48.3 million loan on the 378-room DoubleTree Berkeley Marina was transferred to special servicing this month for “imminent monetary” default.

The ratings company gave low revenue as one reason for the default, with a debt service coverage ratio of just .34x last year. It has been below issuance since the pandemic, according to Morningstar.

Hong Kong-based Junson Capital, the family office for Chinese billionaire Cai Kui, has owned the waterfront hotel since 2014 through 200 Marina LLC. The loans in question were originated by Wells Fargo and UBS in 2017 and packaged into a commercial mortgage-backed securities offering that year.

Bingdong Zhao, the New York-based head of Junson’s Real Estate Investment Division, is listed as the manager of 200 Marina LLC in city documents. He did not immediately reply to a request for comment.

Morningstar analyst Sarah Helwig said this loan is the only current one in their database that is sponsored by Junson Capital. Junson had a 2018 loan backed by four hotels in the Magnitude Hotel Portfolio go into special servicing during the pandemic, she said, but performance recovered and the loan was paid off by its February 2023 maturity.

In April 2020, Junson representatives worked out a new 22-year extension to the land lease with the city, which owns the 14 acres the hotel and its 425 parking spaces have sat on since 1972, according to city records.

The lease now runs until 2080 and negotiations included a $3 million capital contribution for sidewalk improvements as well as an increase in rent minimums from $306,000 a year to $841,591 a year, with annual adjustments for inflation, according to a city report on the lease.

The hotel also pays the city a percentage rent on a quarterly basis, with a credit given for minimum rent, and that remains at 5 percent of room revenue and 2.5 percent of food and beverage revenue. Starting in 2040, and every 10 years after that, the city can reset those percentages “if they are no longer reflective of market trends,” the report says.

The new lease also requires the owner and any successor to operate it as a full-service hotel with at least an “Upscale” rating as defined by the STR Chain Scale. Other Upscale brands include Four Points by Sheraton, Hyatt House, Crowne Plaza and Wyndham. The 2020 lease report also noted that the owners had just completed an $8 million renovation to their back patio and waterfront restaurant, The Berkeley Boathouse.

Even prior to the rent increase, the Doubletree Hotel’s $1.4 million in annual rent payments made up more than 20 percent of all Marina Fund revenue and its transit occupancy tax generated close to $3 million for the city’s general fund, according to the report. City Manager Paul Buddenhagen and Parks Recreation and Waterfront Director Scott Ferris did not immediately reply to a request for comment on the possible impacts of the default on the city and its marina, which is also home to two other full-service restaurants, Cesar Chavez Park and the Berkeley Yacht Club.

This is the second time the same hotel has been in default, albeit under different ownership. In 2010 it was owned by a partnership of Houston-based Westmont Hospitality Group and Montreal-based Cadim when they went into default on a $160 million loan with Citigroup, according to reporting from the time. That loan covered seven hotels in total: the Doubletree Berkeley, plus two hotels in Florida, two in North Carolina, one in Michigan and one in Ohio.

DoubleTree Berkeley Marina is also one of many hotels under financial strain in the Bay Area since the pandemic, including two owned by Park Hotels in San Francisco, which recently found a buyer on its $725 million debt.