Neway Hospitality closed on $11.3 million in Commercial Property Assessed Clean Energy financing for construction of a dual-branded hotel in downtown Houston.
Lone Star PACE, a facilitator of the Texas Property Assessed Clean Energy program, orchestrated the deal with Neway for its 275-key Holiday Inn Express/Staybridge Suites. The hotel will replace a parking lot at 1319 Texas Avenue, near Minute Maid Park.
The loan will be aimed at improving the 17-story building’s structural envelope and upgrading its electrical, mechanical and HVAC systems to be more environmentally friendly.
C-PACE allows property owners to borrow at low rates to make energy upgrades. The financing is repaid via a special tax assessment attached to the property and typically stays with the property in the event of a sale.
Sugar Land-based Neway secured a $53 million construction loan for the project from Arizona-based Arriba Capital last year. Commercial real estate lending experienced a 52 percent dip nationwide last year. Lenders have grown increasingly selective amid interest rate hikes.
“With a constrained debt market, discovering novel methods to complete the capital stack is essential for progressing projects,” said Neway president Ali Momin.
The project will have 144 keys on the Holiday Inn Express side, on Texas Avenue, and 131 on the Staybridge Suites side, on Austin Street. A 3,000-square-foot Urban Street Market grocery store is planned for the ground floor. The project is slated to be completed this fall.
While Houston was deemed the country’s “worst hotel market” by Trepp last March, the Bayou City is on the come up. Houston saw robust growth in the hospitality sector by the end of last year, according to Houston First Corporation. Record-breaking multi-night concerts by Beyoncé and Taylor Swift last year, as well as the College Football Playoff National Championship at NRG Stadium in January, boosted the numbers.
Hotel reservations increased 5 percent last year, while occupancy rates grew nearly 6 percent year-over-year. Average daily rates and revenue per available room jumped by 6 percent and 12 percent, respectively.
Occupancy grew nearly 3 percent in January year-over-year, to over 55 percent.
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