This Hyatt-Brand Tommie Hotel is located on 6516 Selma Ave, Los Angeles, CA, next to Hollywood Boulevard and Sunset Boulevard and only 1 kilometer walk from the Roosevelt Hotel. Tommie is a new, micro lifestyle hotel brand by Hyatt. The hotel is being developed by Relevant Group, who has built about a dozen other hotels in the Los Angeles area. Construction started on March 2018 and is expected to be completed by May 2020. The total cost of the hotel is USD $59 million, including $14mm in developer equity and up to $45mm in immigration investment funds. Commercial real estate firm CBRE estimates that the hotel will be worth USD $75mm after stabilization. This hotel is an attractive prospect for investment immigration, “EB5,” capital, because it provides many jobs from construction and hotel operations, and each EB5 investor must create 10 jobs to get a green card for his family.
What is the Structure of the Investment
First, the hotel is completely funded, and construction will take place. The structure is similar to a personal home loan. The Owner equity is like the down payment on a house. The Bridge Loan is like money borrowed from family/friends for the down payment, but requires a higher interest rate than the mortgage, because it would be repaid after the bank if the home was foreclosed. And the EB5 Funds, in this hotel, are like the bank mortgage, repaid first if there is a foreclosure and have the lowest interest rate. Currently, EB5 funds will be used to repay the Bridge Loan to lower the overall project interest rate.
Can Investment Arrive After Completion of the Hotel?
For EB5 investment, money can certainly come after the completion of the hotel. And, construction jobs from before the investment arrived can also be counted towards the EB5 investor. The idea is that the US Government does not want to restrict American real estate developers and make them pause their construction to wait for EB5 funds.
What Are The Returns on Investment in this Hotel?
The primary return for anyone investing into this hotel will be a green card for the investor and his family. After that, there is a 0.5% interest for the first five years, 2% interest in year 6, and 3% interest on a possible year 7 of the loan.
How Safe is this Investment?
Financially, for an EB5 investor, this project is about as safe as possible. Once the EB5 fundraising is complete, the senior loan will be the EB5 loan. So, if the developer cannot refinance or sell the hotel later, the EB5 investors can actually foreclose on the hotel and will get repaid from a sale before the developer. This is the same financial position as a mortgage loan on a house.
For immigration, this hotel is also a very safe investment. More than 50 investors have received approval from the US Government that the investment is qualified for green card investment. And, if an investor’s green card application is denied by the US government for personal reasons, the hotel will even repay the investor his/her investment within 90 days.
An Important Side Note
Because $32.5 million of the EB-5 funds to date are coming from Mainland Chinese investors, the remaining estimated $12.5 million in EB-5 funds are the only funds that need to be refunded first. The 65 Chinese investors will still be stuck in a 15 year visa queue at the time of the loan maturity, so they will have to stay in the project. The 25 non-Mainland Chinese investors’ $12.5 million will easily be refunded with a refinance of the project worth at least $75 million. In other words, the project will only have to refund 21% ($12.5 million) of the capital in the project, making this an attractive investment for non-Chinese EB5 investors.
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