With the assistance of CBRE, Monahan Parker Inc. has secured $43 million in financing for the development of a new AC Marriott hotel in Marin County in the San Francisco Bay Area. With funds in place, construction of the 140-key property in downtown San Rafael will commence immediately.
AC Marriott will take shape at 1201 Fifth Ave. on a site that had been home to a 10,600-square-foot office building and surface parking lot. CBRE arranged the construction financing for the hotel through ACORE Capital, which provided Monahan Parker with a non-recourse, floating-rate loan. Amid fears of an economic downturn and other trepidations, lenders tend to proceed with caution in the hospitality sector, but the current climate did not dissuade the lending community from heavily pursuing the AC Hotel opportunity; numerous capital sources expressed interest.
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“There is no question that lenders are typically more conservative when evaluating the hotel industry,” John Nelson, executive vice president with CBRE, told Commercial Property Executive. “In the event of a downturn, hotels are one of the first asset classes affected. Lenders tend to look for assets/opportunities located in markets with exceptionally strong fundamentals and diverse economic bases like San Rafael.” Downtown San Rafael is considered the heart of Marin County, which is a magnet for both business and leisure travelers.
Ticking the right boxes
In addition to the AC Marriott project’s Marin County location, potential lenders were enticed by the experienced sponsorship, as well as the high average hotel occupancy in the market. Marin County recorded an average hotel occupancy level of approximately 81 percent in 2018, according to the Marin Convention & Visitors Bureau’s annual report. Additionally, AC Marriott will be the first major hotel to be erected in San Rafael in more than two years. “There is definitely pent up demand for new product,” Nelson said. “Occupancy in the [San Rafael] submarket has been above 78 percent since 2014 and in the last six years, demand for guestrooms has increased 2 percent annually, while the average daily rate has increased more than 6 percent annually.”
Monahan Parker has tapped CSI Construction to take on the role of general contractor for AC Marriott. The hotel is on schedule to deliver in the third quarter of 2021. Monahan Parker has not disclosed the development cost of the project; however, according to a San Rafael Planning Commission document, construction hard costs for the hotel will total approximately $23 million.