GFI Real Estate is in negotiations to refinance debt on its Hotel Seville NoMad property in New York through a $60 million land sale-leaseback transaction and potential bond issuance.
The real estate investment firm signed a non-binding term sheet to sell the hotel's ground rights to an unnamed third party while simultaneously leasing the land back, according to GFI filings this week with the Tel Aviv Stock Exchange.
The company is also considering issuing a new series of corporate bonds on the exchange to support a refinancing.
The transactions would position GFI to capitalize on improving hotel fundamentals in New York while securing financing at favorable terms given the current interest rate environment, according to the company.
Hotels in Manhattan's Midtown South, where the 348-room hotel is located, continue to experience robust growth, with 12-month revenue per available room increasing by 8.3% through July, according to CoStar analysis.
The recovery of group, business and leisure demand in New York, combined with increased return-to-office requirements, has driven market performance to new heights. Additionally, the conversion of some hotel rooms citywide into shelters has reduced available inventory.
Under the proposed terms of the sale-leaseback, GFI estimates the land sale transaction will close at $60 million. It would then lease back the land for 99 years. A unique provision allows GFI to repurchase the land for $1 after 65 years.
The company plans to use proceeds to retire existing hotel financing, including a senior loan with an outstanding balance of $130.1 million as of June 30.
GFI cautioned that final transaction details remain undetermined, and completion is not guaranteed. Any bond issuance requires credit-rating agency approval, regulatory clearance and board authorization.
The Hotel Seville NoMad is part of Hyatt's Unbound Collection, a portfolio of independent luxury hotels. Hyatt took over management of the property in April, rebranding it from the James on Madison after some ground-floor space was converted to retail, including adding the Scarpetta restaurant and Seville lounge.