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LYNCHBURG, VA-Ward's Road Corridor, LLC has received a $12-million construction loan to begin work on a 126-room Hilton Garden Inn & Conference Center here. Brokered by First American Realty in Dallas, the 80% loan-to-cost financing program is interest-only during the first half of the five-year term.
Sponsors of the project include contractor Scott McAllister of Helm Builders, LLC of Apex, NC, Norris D. Blanks of Washington, DC and Robert Bruce Johnson of Lynchburg. Once complete, the hotel will be managed by Destination Hospitality, of Virginia, LLC, owned and operated by the project sponsors and Suresh Mathur of Roebuck, SC.
Destination Hospitality also plans to develop two additional hotels in Virginia, Blanks tells GlobeSt.com. "We are looking at two locations right now and hope to decide before the end of the year." He says the capital allocations for these two hotels, which will be in different markets, are roughly $20 million to $24 million.
Total development costs of the soon-to-be-constructed Hilton-franchised Lynchburg property will reach $15 million. It is also poised for further redevelopment as the sponsors have acquired two acres of land next to the site that Blanks says is ideal for a chain-style restaurant. "At the moment we don't have any firm takers to develop this, but we have had two inquirers. This is the last available piece of land within this commercial corridor."The Lynchburg market itself is undergoing significant development, Blanks continues, attracting retailers, hoteliers and new developers. "There is some $60 million of new retail development currently under way," Blanks says. He also cites recent local news reports that Liberty University--founded by Rev. Jerry Falwell and a focal point for his ministerial activities--is planning to make 100 acres of land available for retail development.
Indeed, the market's activity--as well as a little push from Falwell--helped the sponsors attain favorable financing terms for its construction loan, according to Cameron J. Larkin, senior vice president of Business Development, Hospitality Financing, at First American Realty.
"Five years of interest-only financing is much longer than one would typically get for a hotel," he tells GlobeSt.com. "Also, normally lenders don't like to go above 75% of loan-to-coast. But the lender in this case loved the sponsorship and loved the market."
There is very little hotel product in Lynchburg even though the market is undergoing substantial development, Larkin says. "Also, this property is located on the edge of Liberty University, which is doubling in size over the next few years to 20,000 students." Larkin says Falwell wrote to the lenders describing the expected growth of the university and how it will directly impact the hotel. "Even if the university only generates 10% to 15% of what he claimed, that will still be very good business," Larkin says.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
