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Relevant Group lands “rescue” financing for 2 boutique hotel projects

Relevant Group’s Grant King and Richard Heyman with the Thompson and Tommie hotels (Relevant Group)
Relevant Group’s Grant King and Richard Heyman with the Thompson and Tommie hotels (Relevant Group)

Facing cost overruns and pandemic-related construction delays, Relevant Group’s dream of building a boutique hotel empire in a two-block radius in Hollywood was turning into a nightmare.

A $136 million construction loan was coming due on two hotel projects, and contractors were alleging the developer owed them hundreds of thousands in unpaid work.

But Relevant now appears to have averted disaster. The company landed $72 million in “rescue” financing from a newly formed investment firm to complete construction on the delayed hotel projects, The Real Deal has learned. Relevant also secured a three-year extension on the maturing loan, now backed by the same investment firm, which focuses on distressed assets.

The company, Machine Investment Group, provided the new debt for the 212-key Tommie and 190-key Thompson hotels, which are expected to be completed by summer. The fixed-rate mezzanine loan carries a three-year term. Machine also secured an extension on the three-year construction loan that was expiring, which Calmwater Capital had provided.

Thompson Hotel (Relevant Group)
Thompson Hotel (Relevant Group)

Both projects have been pushed back: The Thompson was originally set to open in 2019, while the Tommie had been slated for 2020.

Relevant, run by Richard Heyman and Grant King, did not respond to several requests for comment. Calmwater did not return a call for comment.

While the pandemic hasn’t led to the expected wave of distressed properties hitting the market, mezzanine lenders have taken control of assets through loan defaults or after beleaguered owners handed over the keys. Machine said it could take control of Relevant’s hotels under similar circumstances, and appears to now be the backstop for the Calmwater loan extension.

New York-based Machine was founded last summer by Andy Kwon and Eric Rosenthal, former brokers at Garrison Investment Group.

Rosenthal said he expects the pummeled L.A. leisure sector to bounce back and “lead to outpaced recovery” that will benefit properties like the Thompson and Tommie.

Hotel empire dreams

Relevant has been planning its Hollywood hotel empire for years, focused on a tight few blocks between Sunset and Hollywood boulevards.

In 2017, it opened the first of four hotels in the area, Dream Hollywood, which includes restaurants Tao and Beauty & Essex from hospitality firm Tao Group. In addition to the Thompson and the Tommie, Relevant is building the 114-key Selma hotel and planning to redevelop the landmark Citizen News building into an event space.

Tommie Hotel (Relevant Group)
Tommie Hotel (Relevant Group)

Relevant’s challenges also include allegations it hasn’t paid some of its contractors; four of them filed liens against the properties. Last month, flooring company Top End Terrazzo said it was owed $313,000 for work done on the Thompson, and material supplier Action Gypsum Supply said it hadn’t been paid $27,000 it was owed on the same hotel, records show. Top End owner David Paternostro said Relevant paid the company $250,000 last week.

In March 2020, JB Wholesale Roofing claimed it had not received $121,000 in work it did on the Thompson. Records show Relevant paid back just over the money a couple of months later, but still owed $56,000 as of May 2020.

Relevant’s development plans also include multifamily properties and earlier this month proposed a 331-unit apartment building in Downtown L.A.; it was the firm’s first new construction plan in over a year.

It has also proposed a 150-unit affordable complex in Skid Row, another of the same size in South Westlake and a project that would convert the single-room occupancy Morrison Hotel in South Park into market-rate rentals.

The post Relevant Group lands “rescue” financing for 2 boutique hotel projects appeared first on The Real Deal Los Angeles.

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  • 30 April 2021
  • The Real Deal
  • Uncategorized
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