Machine Investment Recaps Hollywood Hotel Portfolio for $208M

Machine Investment Group has announced the $208 million recapitalization of a hospitality portfolio located in Hollywood, CA.  With the package, sponsor Relevant Group can complete the construction of the two hotels by this summer.

The portfolio, which is under construction, includes the Thompson and tommie branded hotels and event and food and beverage spaces in the Citizen News Building. The $208 million whole loan moves the previous senior mortgage held by Calmwater Capital to a $136 million A-note and incorporates a $72 million B-note originated by Machine. A joint venture sponsored by affiliates of Machine Investment Group and Taconic Capital provided the B-note.

“We’re pleased to deliver a financing solution to see these properties through to completion,” said Eric Rosenthal, managing partner of Machine, in a prepared statement. “We were able to move quickly after sourcing this transaction off-market, collaborating with the sponsor and existing lender toward a recapitalization that works well for all parties.” 

The 190-key Thompson Hollywood Hotel and the 212-key tommie Hollywood hotel will feature a combined 30,000 square feet of food and beverage space, including two rooftop bars with unobstructed views of the Hollywood Hills. The Hollywood Citizen News Building will feature an additional 45,000 square feet of world-class dining and event space.

New York-based Machine focuses on opportunistic, distressed and special situations investments across the US. The firm’s recent transactions include the $54.5 million acquisition of Stevens Creek Executive Park in San Jose, CA and providing a $30 million credit facility secured by a preferred equity interest in approximately 3,500 hotel rooms. 

Other groups are also amassing funds for distressed hotels. Earlier this month, Ares Management Corp. closed its Ares US Real Estate Opportunity Fund III, which will target distressed, repositioning, and selective development opportunities. It was oversubscribed with approximately $1.7 billion of commitments compared to its $1.5 billion target. This fund is the largest US real estate equity fundraise for Ares and represents a significant increase from the $1 billion of commitments raised for the predecessor fund and related vehicles. 

In March, American Ventures Partners announced that it launched the American Ventures Strategic Property Fund to invest in distressed US commercial real estate. The fund, which will provide a tax-advantaged structure to non-US investors, has a target capital raise of $1 billion. It will focus on properties valued at more than $50 million and priced below replacement cost.

 The Strategic Property Fund is targeting returns of 15% to 18%, net of fees. It will be backed by conservatively leveraged, well-located Class A properties and supply-chain facilities. The portfolio will maintain low and moderate leverage while controlling tenant size and industry exposure.