A bank syndicate led by Fifth Third Bank has provided Mack-Cali Realty Corporation subsidiary Roseland with a $94 million construction loan that will allow the developer to move forward with the development of two Marriott hotels at the site of a $3 billion New Jersey waterfront complex.
The three-year loan, provided with Santander and Investors Savings Bank, carries two one-year extension options and was priced at Libor plus 4.5%, Gabriel Shiff, chief investment officer with Roseland, told Real Estate Capital.
The total cost of the development is $129.6 million, which in addition to the loan package includes $35.6 million in equity. Mack-Cali provided 90 percent of that equity, while hotel developer XSS Hotels put up the remainder.
“Hotel transactions of this type often have many more sources of capital, so the ability to achieve an almost 75 percent loan-to-cost senior financing without mezzanine or preferred equity requirements made this an attractive structure,” Shiff said.
Plans call for a full-service, 210-room Renaissance hotel and a 154-room Residence Inn, with meeting/function space for 450 guests and a 15,000 sq ft deck off the sixth floor sky lobby with views of Midtown Manhattan.
The hotel space is just one component of Roseland’s $3 billion mixed-use, master-planned Port Imperial development in Weehawken, which spans two-and-a-half miles and includes residential and commercial space, a transportation center and a waterfront walkway with parks.
The deal comes at a time when banks have felt the ever-increasing burden of Federal regulations which have often turned them away from riskier, higher-yielding loans, including those backing construction. But banking syndicates are seen as one way to taper the risk of originating whole loans, as is financing well-established sponsors.
“Hotel assets may be riskier relative to apartments, our core business, but as far as hotels go this is a prime development and we expect strong returns,” Shiff said.
While the banks have become less aggressive on the riskier end of the lending spectrum, data suggests that they are in fact growing their overall loan books and market share. Banks — and thrifts together — are expected to retain about $1.04 trillion in commercial and multifamily loans outstanding by year’s end, compared with $967 billion in 2014, according to projections from the Mortgage Bankers Association.
Meanwhile, regional and local banks have been steadily gaining market share in recent years, up to a 15% during the first half of 2015, up from a low of just 9% in 2011, according to data from Real Capital Analytics.
“The financial market liquidity generated by the Federal Reserve Bank with the ultra-low discount rate on offer to banks provides these lenders an advantage,” the firm noted in a recent report.
The Marriott hotels will be built on top of the 850-space Port Imperial parking garage with 17,000 sq ft of ground-level retail space next to the NY Waterway ferry terminal. Each hotel will have its own ground-level entrance and lobby, with a connection on the sixth floor to provide guests with shared access to the outdoor terrace, function space, pool, fitness center and dining.
The hotels are slated for completion by the end of 2017.