A rendering of 175-key Hyatt House Hotel to be built in Rochester, MN.
ROCHESTER, MN—PACE Equity, LLC of Milwaukee has provided $4.3 million in funding for a new Hyatt House hotel here, which marks the first federal Opportunity Zone project to include Property Assessed Clean Energy (PACE) funding.
The 175-key extended-stay hotel, which is under construction, will be located at 315 First Ave., near the Mayo Clinic's downtown campus. The property was the site of the former American Legion Post 92, where Mayo Clinic founders William J. Mayo and Dr. Charles H. Mayo were members in the early 1900s.
The developers, California-based EKN Development Group and their co-developer, initially did their own energy study which qualified them for only $400,000, 10% of the $4.3 million they desired to utilize PACE funding for. PACE Equity's subsequent engineering and regulatory expertise enabled them to commit up front—and ultimately fund—the full $4.3 million, PACE Equity states. The remainder of the capital stack was provided by a construction loan of $29.7 million and $14.4 million in equity.
“Using PACE Equity's funding to replace more expensive preferred equity to complete our capital stack was a game changer for us,” says Ebbie Nakhjavani, CEO of EKN Development Group. “PACE Equity's capital not only boosted our overall returns, but their turnkey process and engineering prowess made working with them an easy choice.”
By investing in an Opportunity Zone with PACE Equity funding, EKN and the co-developer were able to reduce their federal tax load and increase their investor return rate significantly. The developers can also take advantage of the additional perks the program offers, such as minimal limits on the types of properties or business investments that qualify and exemption from certain employment requirements, according to PACE Equity.
Ground was broken for the Rochester Hyatt House Hotel on April 11, 2019, and the hotel is expected to be complete in the summer of 2020.
In May, PACE Equity announced it recently completed funding for the new construction of the Best Western Plus hotel in Isanti, MN.
Midway through construction, the developer required additional funding in order to meet forthcoming hotel flag standards and avoid renovations down the line. PACE Equity provided a turnkey solution by stepping in midstream to retroactively finance additional project costs and qualified upgrades, preventing a delay in the project or future construction needs, according to PACE Equity.
PACE Equity provided nearly 10% of the total funds — $790,000 out of the approximate $7.-million capitalization. A bank provided a construction loan in the amount of $4.8 million, the sponsor provided $1 million in equity and the City of Isanti contributed approximately $1 million worth of land.
|Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
John Jordan
John Jordan is a veteran journalist with 36 years of print and digital media experience.
