Wine, dine, and stay in Napa
Arena Investors’ ability to creatively structure financings sometimes leads to opportunities to finance real estate assets in transition, where the loan is secured by other property or asset types. One such example was our financing of a planned boutique hotel in St. Helena, California, a preeminent location in California’s vibrant Napa Valley wine country. Though this area is perennially popular with foodies, wine lovers, and vacationers, there was a real urgency to the financing need that Arena addressed, because literally within a few short weeks, the potential borrower’s access to the land needed for the hotel was at risk of being lost, as the proceeds of a land loan from a previous creditor were coming due, and there seemed little chance of forbearance from that lender.
Money was needed to pay off those proceeds and bridge to the town’s approval of the construction of the hotel while also funding certain pre-development costs. Besides the hotel, this new project included a spa treatment center, multiple pools, a food and beverage outlet, and additional spaces for cooking demonstrations and preparation classes. Not surprisingly, these plans had been years in the making and already cost millions in pre-development work. But COVID-related slowdowns had resulted in a situation where the borrower’s land loan was due to expire five days prior to the expected approval by the Planning Department.
Further complicating the situation: One of the ground lease owners whose cooperation would be needed for a successful outcome was unavailable in the short timeframe. This was truly a situation where creativity and flexibility—another way of saying, Arena’s ability to see what’s possible—could really make a difference.
And we did, by stepping in and quickly providing a bridge financing solution. The borrower, for the prior decade, had owned and operated a farm-to-table restaurant, which was also accompanied by a general store, outdoor cafe, farmer’s market and extensive event facilities space, with millions of patrons having visited since inception. Restaurant properties and operations can be notoriously tricky to assess for valuation. And while the parent entity had various vineyard and other assets, the hotel project was structured to be isolated from the other businesses. Nonetheless, Arena was willing and able to secure its loan against the land (inclusive of the restaurant operations of the borrower) in order to make this financing happen at the level needed and on time.
We were pleased to help ensure that our counterparty’s creative and ambitious project would not, in the end, be upended by the pandemic. The development ended up receiving approval a month after the initial target and is now in the process of being completed—a win for all the parties involved.