Uptown Hotel Owners Secure $95M in Refinancing in Wake of Sector Squeeze

A publicly traded real estate investment trust and its developer partner successfully refinanced the Marriott Dallas Uptown hotel following a wave of loan maturities that put a squeeze on the hospitality sector.

M&D Commercial Group previously published a market report indicating some $1.5 trillion in CRE debt was expected to mature by the end of 2025, including $110 billion in the hotel and industrial sectors. Unlike consumer loans, which are typically structured with equal payments spread across the duration, many CRE loans are contracted to terminate in “balloon payments,” a large sum due at the end of the loan period. While this kind of loan structure comes with the benefit of lower monthly payments, borrowers can find themselves in a serious financial bind if things don’t go according to plan by the time their loans mature.

Luckily for NexPoint Diversified Real Estate Trust (NXDT) and Alamo Manhattan, the two firms that own Marriott Dallas Uptown, they managed to secure enough refinancing to cover the existing debt associated with the property.

Lenders Are Looking To Make Deals

Access Point Financial CEO Michael Lipson told CandysDirt.com that 2025 should be a busy year, with motivated hotel owners and lenders looking to keep properties afloat.

“It’s the first time in a long time that [hospitality] is a preferred asset class, so a lot of people are looking to place loans on hotels. That’s the good news,” Lipson said. “The bad news is a lot of these hotels may not, given interest rates and everything else, may not size up for refinancing so either there’s going to be new equity or some type of gap financing provided.”

He said lenders are likely to work with prospective borrowers given the new reality.

“Everybody was expecting a lot of distress sales, foreclosures, but no, I think what’s happening is most lenders will either figure out how to restructure deals, give some extensions as hotel performances are improving. As these maturities come again, a number of them will be refinanced by the existing lender or have new debt put on, and again, a portion of those may have that gap financing — mezzanine or preferred equity — that’s available,” Lipson said.

How Did Marriott Dallas Uptown’s Owners Make Out?

NXDT and Alamo Manhattan borrowed $95 million from the private equity firm KKR & Co. Inc. Some $87.5 million of the total loan will cover existing debt associated with the hotel, while the remaining $7.5 million is contingent on two future-funded earnout facilities.

According to a press release published on Tuesday, NXDT and Alamo Manhattan are poised to free up $19 million in cash proceeds between the two.

“We reduced the rate on the new loan resulting in meaningful interest expense savings; however, we cannot disclose the specific rate,” a representative for NXDT told CandysDirt.com in an email. “Regarding the earnout facilities, they increase the loan amount to provide the potential to access additional capital based on certain performance metrics.”

The 14-story, 255-room hotel is at 3033 Fairmount St. and includes 13,000 square feet of meeting space, a rooftop pool, a social lounge, and a restaurant. It also occupies a market niche in the neighborhood, which has become known for expensive five-star, luxury hotels. Marriott Dallas Uptown, which opened in early 2021, is geared more toward business travelers looking for both quality and affordability, according to the press release.

“The asset has performed well and our thesis on the need for that property type/brand/price point/etc. has proved correct,” NXDT’s representative said.

Money’s Getting a Little Cheaper

Some owners of commercial properties across the U.S. have struggled to meet their debt obligations in recent years, resulting in a number of foreclosures and stress sales. The hotel sector, which managed to weather the COVID-19 pandemic better than expected on the whole, saw its share of distressed properties offloaded or surrendered to lenders, as previously reported by Dallas Business Journal.

One factor at play has been the Federal Reserve’s benchmark interest rate, which serves as a standard base rate for lenders to consider when calculating how much to charge borrowers. The effective rate reached 5.33% in 2023 following a number of rate hikes implemented to curb inflation in the wake of the pandemic. A subsequent series of rate cuts in the back half of 2024 brought it down to 4.48% by the end of the year.

As reported by CoStar in October 2024, hotel owners have been eyeing the cost of refinancing in the face of looming debt maturities, many of which were contracted under much lower interest rates five years ago or so. Prospective borrowers could see some relief in the form of further rate cuts, however, the CME FedWatch Tool indicates one isn’t likely until at least March.