Scientific Capital

$4.925 Million Loan Request for the

Refinance of the

La Quinta Inn & Suites of California, MD

Terms and Conditions

You are given access to this loan proposal memorandum because Scientific Capital has determined that you (LENDER) have indicated that you have interest in reviewing this loan request and the lending capacity in offering this loan. The information provided in this memorandum is confidential and may only be shared with LENDER’s internal staff and should not be shared with other lenders, brokers, vendors, and third parties unless authorized by Scientific Capital. LENDER is not authorized to pull credit from the borrowers unless the borrowers have signed LENDER’s authorization form.

This memorandum is prepared by Ramin Mostaan and any questions or comments should be directed to him at the following contact information:

Ramin Mostaan
Scientific Capital
949 477 5000 (Office)
949 302 8300 (Cell)
ramin@scicap.com

Transaction Overview

Purpose

To refinance the existing SBA 7a loan on the La Quinta of California MD, a 112-room interior corridor hotel built in 1982 with an SBA 504 loan to benefit from the lower debt service. The hotel was underperforming and was acquired in July 2021 for $6,050,000 with an SBA 7a loan of $5,000,000 with the goal to do full renovation and to turn around. In 2022, the owners started an extensive renovation that lasted till January 2024 for a cost of $1,700,000 of which $300,000 was included in the $5,000,000 SBA 7a loan and the remaining $1,400,000 was paid from the owner’s liquid sources. The hotel also owns a restaurant building called Plaza Toltecal that is leased out starting 2012. 

Project Strength

  • $1.7MM PIP is complete as of January 2024 and hotel is fully renovated 
  • With a loan of about $5 million and assumed value of over $8 million, the LTV is expected to be at or under 65%
  • Hotel revenue and profitability is increasing after many rooms were closed during the past 2 years 
  • Owners are experienced and financially strong with a number of hotel ownerships in the VA/DC/MD area
  • The refinance to SBA 504 will offer a gain of more than 10% in the debt service, hence qualified for the SBA 504 refinance

Project Challenges

  • Hotel was going through renovations with a number of rooms closed for the past 2 years, this means the revenue was down with low DSCR. Projection based financing of hotels is more challenging

Proposed Financing Structure

Proposed Collaterals

  • First Deed of Trust on the subject property and first lien on the security interest
  • Additional collateral pledged by the borrower: NONE
  • Additional guarantee pledged by the borrower’s affiliates: NONE

Sources of Repayment

  • Primary source of repayment: The rent paid by occupants of the subject hotel
  • Secondary source of repayment: Borrower’s personal excess cashflow and liquid assets
  • Tertiary source of repayment: Liquidation of the property anticipated to be a 75% loan to appraised value
  • Final source of repayment: Enforcement of guarantee

Hotel's Financials and Information

Specifications

  • Address: 22769 Three Notch Rd, California, MD 20619
  • Rooms: 112
  • Corridor: Interior
  • Number of buildings: 1
  • Number of floors: 3
  • Building square feet: 
  • Lot size: 

Location

Photos

Demand Generators and Customer Segmentation

Historical Cashflow

Before reviewing the historical cashflow, we again have to note that the hotel was partially closed in 2022 and 2023 and all the rooms opened completely late January 2024.The chart below shows the RevPar (per STAR report) for the first 4 months of 2024 vs same months in 2023:

The DSCR is calculated assuming the following terms of the Third Party and the debenture loans: 

  • Third Party: CMT + 3% (7.57% as of the date of this write up) @ 25 year amortization 
  • Debenture: 6.56% @ 25 year amortization 

STAR reports

Projections

Borrower Financials and Background

Borrowing Entity Structure

Guarantor Financials

Hemal Patel (7.5%)

Hemal lives in Glen Allen or Richmond which is an hour drive to King George and will be the operator and the managing member. He is an experienced hotelier who is operating a number of hotels. He is managing the following hotels: 

  1. 2012: Super8 of Tappahannock, VA
  2. 2017: Quality inn of Morgantown, WV
  3. 2017: Quality Inn of Culpepper, VA
  4. 2019: Holiday Inn Express of Williamsburg, VA
  5. 2021: La Quinta of California, MD
  6. 2022: Comfort Inn & Suites, Ashland, VA
  7. 2022: Best Western of Kilmarnock, VA 
  8. 2023: Holiday Inn Express of Forest, MS

Hemal has excellent credit background. 

Nikunj Patel (7.5%)

Nikunj lives in Laurel Maryland. He is a software engineer and is partner with Hemal and Chinmay in a number of hotels. Nick operates a La Quinta hotel in Virginia. He has excellent credit history.

Chinmay Amin (7.5%)

Chinmay lives in Fulton Maryland. He is a software engineer and the partner in a number of hotels with Hemal and Nikunj. Chinmay has excellent credit history.

END OF DOCUMENT