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Exterior Entrance Pool Lobby Lounge Lobby King Room

THE OPPORTUNITY

A Post-Renovation IHG Hotel in the Country's Fastest-Growing Corridor, Adjacent to Mayo Clinic's Flagship Campus

Jacksonville is one of the fastest-growing large metros in the United States. The MSA added more than 11 percent to its population between 2010 and 2021, with the submarket immediately surrounding this property growing at 16 percent over the same period. That growth reflects a long-running in-migration trend driven by Florida's favorable tax climate, the city's cost of living relative to peer metros, and a diversified employment base anchored by financial services, defense, and healthcare.

The most significant individual demand driver in the immediate trade area is Mayo Clinic's Jacksonville campus. Spanning 400 acres and more than 2.2 million square feet, the Mayo facility is in the midst of a $300 million expansion that will further increase the volume of patients, family members, referring physicians, and clinical staff requiring lodging nearby. The Holiday Inn Express & Suites at 4791 Windsor Commons Court is the closest off-campus hotel to the Mayo Clinic entrance, a positioning advantage that is difficult to replicate and that produces a reliable stream of medically-driven lodging demand across market cycles.

The Jacksonville market also draws demand from one of the largest U.S. military presences in any metro, with approximately 37,000 military employees stationed across several bases in the region. Bank of America, Amazon, and AT&T operate significant Jacksonville employment centers that generate corporate transient demand. In 2019, the metro posted $43.1 billion in tourism spend, reflecting the breadth of both leisure and business activity in the market.

The property had been through a complete renovation cycle. The sponsor acquired the hotel as part of a two-property portfolio in March 2018 and completed a $1.4 million property improvement plan in the fourth quarter of 2019, bringing the asset to then-current IHG brand standards and securing a 15-year franchise agreement. When COVID-19 depressed travel demand in 2020, occupancy fell to 57.4 percent and RevPAR contracted sharply. By early 2021, however, the underlying drivers of this specific submarket were reasserting themselves, and the opportunity existed to refinance the existing debt at terms that reflected the property's actual position rather than trough pandemic performance.

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THE PROPERTY

104-Room Holiday Inn Express & Suites, Built 2002, IHG Franchise with 15-Year Agreement

The Holiday Inn Express & Suites at 4791 Windsor Commons Court is a 104-key, five-floor select-service hotel built in 2002 and opened in 2003. The property sits on a 2.06-acre site immediately adjacent to the Mayo Clinic Jacksonville campus, giving it a geographic proximity to one of the country's premier medical destinations that no other hotel in the market can match. The room mix of 36 king rooms, 52 queen/queen rooms, and 16 suites provides the range of configurations suited to both the solo medical traveler and the families accompanying patients receiving care at the clinic.

The hotel operates under a Holiday Inn Express & Suites franchise agreement with IHG, with a 15-year term secured following the completion of the 2019 PIP. IHG's loyalty platform and the brand's strong recognition among business and medical travelers support consistent direct and loyalty-channel bookings. The property is managed by a Florida-based hotel management company with more than 15 hotels in its portfolio, including two other Holiday Inn Express locations in the state, giving the management team genuine brand familiarity and direct relationships with IHG field representatives.

The loan was cross-collateralized and cross-defaulted with a companion loan on the Hampton Inn, Jacksonville Beach, Florida, a second property in the same sponsor portfolio. The two-loan structure tied the credit facilities together, ensuring that neither property could be refinanced or sold independently, and giving RRA a consolidated view of the sponsor's Florida hospitality exposure.

At origination in April 2021, the property was appraised at $13,500,000 on an as-is basis by LWHA, placing the loan at a 64 percent as-is loan-to-value. The stabilized appraisal of $15,500,000 reflected a 56 percent stabilized LTV, with the value increase projected as the market recovered from COVID-era trough performance toward historical operating levels. Pre-COVID, the hotel had run at 81 percent occupancy with a $119.10 average daily rate and $96.41 RevPAR in 2019.

THE RRA SOLUTION

$8,700,000 First-Position Refinance Bridge Loan, Cross-Collateralized with a Companion Hotel

RRA structured an $8,700,000 first-position bridge loan to refinance the existing debt on the property. At $83,654 per room, the loan reflected a basis consistent with the property's recent renovation and franchise tenure. The loan included a $505,500 interest reserve to support debt service through the initial period of market recovery, providing the sponsor a runway to allow occupancy and average daily rate to rebuild toward pre-COVID levels before reserves were needed from property cash flow.

The loan was structured at a floating rate of LIBOR plus 730 basis points, subject to a 7.65 percent floor, with a 30-month initial term and two 12-month extension options. The origination fee was 1.0 percent and the exit fee was 1.0 percent. The cross-collateralization with the Hampton Inn, Jacksonville Beach, created a combined credit structure that aligned RRA's exposure across both of the sponsor's Jacksonville-area hotels and ensured that any exit or refinancing event would address both loans simultaneously.

The underwriting reflected a staged recovery from pandemic-depressed performance. Year 1 pro forma projections called for 66 percent occupancy, a $112.66 average daily rate, and $74.34 RevPAR, producing a net operating income of $792,766, a 1.17x debt service coverage ratio, and a 9.1 percent debt yield. Stabilized projections at full recovery showed occupancy approaching 83 percent, a $126.73 ADR, and a $105.18 RevPAR, implying a debt yield above 14 percent once the market had returned to form.

EXECUTION

Market Recovery and Sustained Performance Through the Loan Term

The Jacksonville hospitality market recovered meaningfully from pandemic lows over the course of 2021 and 2022. The Mayo Clinic adjacency, which had provided a floor to the hotel's occupancy even during peak COVID disruption, reasserted its value as medical travel normalized and the clinic's own activity expanded. The military demand base remained consistent throughout, and the corporate accounts associated with the financial services and technology employers in the market recovered as business travel returned.

Throughout the loan period, RRA received regular operating reports from the sponsor and the management company, tracking occupancy, revenue, and expense performance against the projections established at origination. The combination of strong submarket fundamentals, the hotel's unmatched proximity to Mayo Clinic, and the management team's active engagement with the IHG system supported a performance trajectory that positioned the loan for resolution within the initial 30-month term.

THE EXIT

Loan Repaid in Full, August 2023

The loan was repaid in full on August 10, 2023, approximately 28 months after origination, inside the initial 30-month term. All accrued interest and the contractual exit fee of 1.0 percent of the total loan commitment were collected at payoff. The simultaneous payoff of the companion Hampton Inn, Jacksonville Beach loan, consistent with the cross-collateralized structure, resolved both credit facilities at the same time.

The outcome reflected the quality of the underlying real estate and the durability of the Mayo Clinic demand driver. A hotel positioned as the closest off-campus lodging option to one of the country's most significant medical destinations carries a competitive advantage that is structural rather than cyclical, and that advantage supported the hotel's recovery and the loan's full resolution well within the original term.

Geographic proximity to a major medical campus is among the most durable demand drivers in hospitality underwriting. Mayo Clinic's Jacksonville expansion does not move, does not reduce its patient and staff volume based on macroeconomic conditions, and does not share its referral geography with competitors. Lending against a well-franchised, recently renovated hotel positioned as the closest option to that campus, at a basis supported by a post-renovation appraisal, produced a full payoff inside the initial term.

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