Beny Alagem and Cain International have received a financing boost on two hotels in Beverly Hills, a sign that big institutional investors are making their way back to hotel financing.
The duo received $500 million in refinancing from Aareal Capital and Goldman Sachs on the 566-key Beverly Hilton and the 170-key Waldorf Astoria hotels, according to a joint announcement on Monday. Aareal Capital, the New York-based affiliate of German investment firm Aareal Bank, provided a $340 million senior mortgage loan on the hotels, while a Goldman Sachs real estate fund provided a $160 million mezzanine loan.
The financing replaces a prior loan from Pimco and will mature in three years, with two one-year extension options, according to Alagem Capital’s president, Ted Kahan. The new financing will allow both Alagem and Cain to “operate the hotels during the planning process for the One Beverly Hills project,” Kahan said.
Both hotels are part of Alagem Capital and Cain’s One Beverly Hills mixed-use plan — two towers that will include a total of 303 condos and a separate 42-room hotel, as well as eight acres of green space. Existing portions of Alagem’s Beverly Hilton Hotel will be demolished to make way for the new complex, while his Waldorf Astoria hotel will remain intact.
The Beverly Hills City Council approved the $2 billion development in June. It is expected to be completed in 2026.
As part of the development, Alagem and Cain plan to make significant upgrades to the Beverly Hilton. They’ll also have to pay a $100 million public benefit payment over the next eight years to the city of Beverly Hills, as part of a development agreement with the city for not including any affordable housing.
Aareal and Goldman’s new financing also suggests institutional banks are returning to the hotel sector, after the pandemic halted hotel investment in Los Angeles. Earlier this year, Aareal also provided $360 million in refinancing for SL Green’s office tower at 100 Park Avenue in New York City.
The financing “is a major milestone” for the development and “underpins our belief in the bright future for the hospitality industry and global gateway cities,” Cain International CEO Jonathan Goldstein said in a statement.