Barings, Mack fund $133m debt package for San Diego hotel

Barings Real Estate and Mack Real Estate Credit Strategies have joined forces to originate a $133 million debt package for The Pendry Hotel, a class A hotel in San Diego’s Gaslamp sub-market.

The financing was originated on behalf of Encinitas, California-based manager, Robert Green Company. The short-term loan was structured with mezzanine and senior mortgage components, according to Akbar Tajani, a managing director at Barings.

Barings funded the mezzanine component of the loan, with Mack originating the senior portion.

“We looked at doing a whole mortgage,” Tajani told Real Estate Capital USA. “[But we decided] on doing a mezzanine loan because to us that was the right overlap between opportunity, capital and the returns that we saw.”

The financing marks the first time the lenders have worked together. It is also one of a handful of hotel deals that closed in March due in part to broader volatility which includes an uncertain rate outlook.

Still, the opportunity seemed to be a sturdy one for the partners. The property is a best-in-class trophy asset in a strong market with a stable outlook.

“It just seemed to check all the boxes for us,” said Tajani. “[After we decide we like] the asset, the market, the location, the sponsor, then we think about value of the asset and where the financing needs are. Then we find a part of the capital structure and the risk return that lines up [best] with Barings’ risk return appetite and capital.”

In market cycles like this, this type of deal exemplified the need for quality investors with strong plans, added Tajani.

The firm also attributes its success with this particular deal to its relationship-oriented approach and commitment to getting deals done.

“When we commit to an opportunity, despite macro movements in the market, we follow-through. At Barings we [believe] credibility and our reputation in the marketplace is extremely important,” he said.

Tajani continued: “It’s a balancing act that we try to find on every deal, depending on what type of opportunity it is; where the asset is; and our relationship [with the] borrower.”