by Naveen Malhotra | Portfolio Management & Servicing
In January 2020, we launched Orlando Hotel Portfolio on the Yieldstreet platform. Investors had the opportunity to invest in a real estate bridge loan secured by two limited-service hotels in the Orlando, Florida area. The hotels catered to a lower-income demographic traveling to the various Orlando attractions, including Disney World. The offering had an expected duration of 24 months, with a target annual interest rate of 8%.
Due to COVID-related restrictions, the Borrower was forced to shut down the hotels in March and was unable to make interest payments beginning on April 1, 2020. Yieldstreet and the Originator, Avatar Financial, first attempted to work with the Borrower but a resolution was unable to be reached and a Notice of Default was issued.
As a result of a creative and proactive collaboration among the Borrower, the Originator, and Yieldstreet, we were ultimately able to achieve 100% recovery of investor principal and outstanding interest through a successful workout strategy.
The two hotels are set on large land parcels that are not efficiently utilized. The investment thesis was that in the event that the hotels did not perform well, an alternative use, multi-family specifically, provided a backup take-out option. The land had the potential to be re-zoned for multi-family use through a fairly quick and easy process. In addition, given the fact that the Borrower had already invested almost $6M of capital in the transaction, the Borrower was highly incentivized to find a solution. The thesis proved correct and the Borrower found a buyer to purchase one of the properties to repay the outstanding debt while still returning a significant amount of their equity.
Below is an overview of the workout process that achieved full recovery of investor principal and outstanding interest.
To learn more about our due diligence process, please review our post on our loan workout process and our recovery case study on Irwindale Industrial Financing.
As always, for any additional questions you may have regarding Yieldstreet offerings and our workout process, please reach out to us at [email protected].
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