Privatization of Army Lodging (PAL)
The Opportunity: Privatization of Army Lodging (PAL) was a $25 million mezzanine loan originated by Behringer Harvard Opportunity REIT II, Inc. (the “Company”) in August 2009 to help fund the redevelopment of lodging facilities located at 10 U.S. Army installations in nine states.
Result: Loan was paid in full, plus interest and an early payment fee, in August 2011. The $25 million principal loan balance, plus interest and additional fees and proceeds totaling $4.9 million for a total of $29.9 million was repaid to the Company in August 2011, generating a deal-level IRR of 20.9%.
Asset Type: Limited service hotels
Asset Size: 3,200 hotel rooms on 10 U.S. Army installations
Investment: Mezzanine loan originated in August 2009
Repayment: August 2011
- Total capital of $80 million, including the Company’s $25 million loan commitment and Bank of America providing $35 million in first mortgage financing and Actus Lend Lease providing $23 million in developer capital
- The Company earned a 2% commitment fee plus 18% annual interest accrual, with up to 5% prepayment penalty
- Both the Company’s and Bank of America’s loans were fully funded and the project was on schedule (approximately 80% complete) and under-budget at the time of repayment
- Majority of hotels branded Holiday Inn Express, Staybridge Suites or Candlewood Suites operated by InterContinental Hotels