Republic Compound Fund, LLC has formed a special purpose vehicle (the "Feeder Fund")** to allow Republic investors to participate in a mezzanine loan collateralized by the Hyatt Place Noma located at 33 New York Ave NE, Washington, DC ("Hyatt Mezz"). The $11,500,000 mezzanine loan was made by an affiliate of Driftwood Capital in August 2020.
The projected cash distributions for three years to Feeder Fund investors are expected to average 8.6% annually. This structure allows us to reduce the minimum investment to $15,000 from Hyatt Mezz's typical minimum investment of $50,000.
Institutional Grade Property: Built in 2014 from reinforced steel, concrete, and glass construction, the Hyatt Place Noma is a 14-story, 200-key select service hotel. The Hotel is LEED Silver certified. The Hotel’s amenities include a 1,600 square foot meeting room, fitness center, and guest laundry facilities. In addition, the Hotel benefits from great visibility along New York Avenue, a major thoroughfare, and collects over $388,000 per year in rent from billboard signage.
Strong Franchise Affiliation: The Hotel benefits from its approximately 17-year remaining franchise agreement with Hyatt, one of the world’s largest hotel companies.
Growing Market: The Hotel, located in the NoMa neighborhood of D.C., is the capital’s fastest growing urban submarket. NoMa has seen approximately $8 billion in private investment since the early 2000’s, yielding 13.7 million square feet of office space, 6,400 multifamily units, and 370,000 square feet of activated retail space. A large number of General Services Administration ("GSA") tenants are located within the NoMa neighborhood, including the Department of Justice, Federal Energy Regulatory Commission, the SEC, and the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives which is located one block east of the Hotel.
An affiliate of Driftwood Capital provided a $10.5 million Mezz Loan Initial Funding at a 13.65% interest rate spread above 1-month Libor (“Libor”), subject to a Libor floor of 0.35% (effective rate of 14.00%) with all interest payments paid current. The loan term is three years and has no extension options.
Senior Loan: Benefit Street Partners provided a $27.0 million senior loan at a 6.50% interest rate spread above 1-month Libor (effective rate of 6.85%) with all interest payments paid current.
The following highlights detail key components of the loan structure:
•In-Place Cash Management / Distributions Waterfall / Cash Flow Sweep: In-place cash management was structured to ensure payment in the following order: 1) taxes and insurance; 2) Senior Loan debt service; 3) operating expenses; and 4) Mezz Loan debt service payments. Any excess cash flow is swept to replenish the interest and shortfall reserve.
•Interest and Shortfall Reserve: $5,100,000 interest and expense shortfall reserve funded at closing is projected to cover combined (Senior Loan plus Mezz Loan) debt service payments through Month 27, equating to 75% of the loan term.
•Minimum Interest: The loan structure stipulates that a minimum of 18 months of interest payments are to be paid by the Mezz Borrower. The minimum interest requirement also applies to the Senior Loan.
•Intercreditor Agreement: Among other things, the intercreditor agreement provides for the following:
- The subordination of the claims of the Mezz Loan to the senior loan;
- Rights of the Mezz Lender to cure a Senior Loan default in the event the Mortgage Borrower defaults on the Senior Loan, thereby preventing an immediate foreclosure of the underlying property by the Senior Lender; and
- Steps that must be taken by a Mezz Lender related to the foreclosure of its collateral (such as providing a new creditworthy entity to act as a replacement guarantor for any guaranteed obligations under the Senior Loan).
• Ongoing Net Worth & Liquidity Requirement: Mortgage Borrower is required to maintain a minimum of $30,000,000 in net worth in addition to $1,500,000 in liquid assets.
Driftwood Capital is a vertically integrated commercial real estate investment, development, and lending platform specializing in hospitality. The principals of Driftwood Capital have a 30+ year track record transacting on more than $5 billion in hospitality assets through various affiliated management and ownership entities. In 2015, the principals of Driftwood Capital launched a unique syndication model for accredited investors to access otherwise exclusive institutional-quality hotels. Through this innovative syndication model, Driftwood Capital successfully turned $50 million of initial investment into more than $1 billion in assets across 18 hotels and 5 development deals with more than 5,100 rooms in 12 states. All Driftwood Capital funds benefit from the principals’ affiliation with Driftwood Hospitality Management (“DHM”), which currently manages over 70 full and limited service hotels with more than 13,000 rooms across 22 states and is regarded as a long-standing industry leader and best-in-class operator.
33 New York Avenue, Washington, DC
NOMA, Washington, D.C.
The Hotel is located in the NoMa neighborhood of Washington, D.C. which is located within District of Columbia county and part of the Washington-Arlington-Alexandria metropolitan statistical area (“MSA”). The Hotel is near several regional demand generators, including, among others: U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives (0.2 miles away), Kaiser Permanente Capitol Hill Medical Center (0.9 miles away), and the Walter E. Washington Convention Center (1.3 miles away).
* Financial figures are estimates only. The estimates are not guarantees of future results.
** Investors will be investing in Hyatt Mezz, a Series of Republic Compound Fund, LLC. This SPV will aggregate investments and make a single investment into Hyatt Mezz. Investors will pay an annual management fee equal to 1.0% of their initial capital contribution.
All facts, figures, and data have been provided by Driftwood Capital and have not been verified by Republic Real Estate nor is Republic Real Estate making any representations with respect to this information and/or its accuracy.