A joint venture between a Miami-based developer and a Latin American family office approached Hectocorn to fund construction of a 185-key oceanfront lifestyle hotel on Miami Beach. Total project cost was $148 million, with the sponsors contributing $52 million of equity.
The developer had delivered three residential towers in South Florida but no hotels. The family office had capital and conviction but no US construction experience at all. Neither had a lending relationship capable of writing a nine-figure hospitality construction cheque.
Hectocorn arranged a $96 million senior construction facility at 65% loan-to-cost with a US private credit fund, priced at Term SOFR plus 450 basis points over an initial 36-month term.
Client Requirement
The joint venture needed a construction facility that would:
- Fund 65% of total project cost, including land already acquired for cash
- Draw down against certified construction progress rather than on a fixed schedule
- Run at least 36 months, with extension options covering ramp-up to stabilisation
- Accommodate offshore limited partners without triggering adverse US withholding treatment
- Permit a takeout refinancing on stabilisation without punitive prepayment penalties
The sponsors also wanted certainty of execution. They had already committed to a general contractor and a brand affiliation, and a failed financing would have been expensive in both fees and credibility.
The Challenge: Construction Risk in a Rate-Driven Market
Miami’s trading numbers in 2026 were exceptional, but the reasons behind them needed careful handling. The market posted the largest ADR and RevPAR gains of any US top-25 market during the World Cup period, with ADR up 51.1% to $267.87 and RevPAR up 51.6% to $196.87. Occupancy, however, was essentially flat at 73.5%. The entire uplift was rate, and much of it was event-driven.
Underwriting a 2029 opening on 2026 World Cup comparables would have been indefensible. Any credible model had to strip the event premium out and show what the asset does in a normal year, against a national backdrop where RevPAR growth for 2026 was forecast at only 2.2%.
Construction lending itself remained available but expensive. US hospitality construction debt was being written at SOFR plus 350 to 600 basis points, with leverage running to 65–75% of cost for experienced sponsors and beyond that only with mezzanine. Precedent existed — in March 2026 Peachtree Group provided $103 million to a joint venture of Chetrit Group, Jesta Group and Lotus Group to recapitalise and complete the 289-key Hilton Miami Beach Convention Center Hotel — but that transaction involved sponsors with deep hospitality histories.
The wider Miami debt market was clearly open for hotels. Blackstone secured around $205 million from JPMorgan Chase for EAST Miami in July 2026; Fort Partners obtained $341 million on the Four Seasons Resort Palm Beach; JLL arranged $600 million for the Diplomat Beach Resort through JPMorgan and Citi. All of those were stabilised assets with institutional sponsors. Ground-up construction with first-time hotel developers is a different conversation.
Outcome
Hectocorn secured a $96 million senior construction facility. The agreed structure comprised:
- $96,000,000 senior construction loan at 65% loan-to-cost
- Term SOFR + 450 bps — approximately 8.1% all-in at first draw, against a SOFR reference of 3.64%
- 00% origination fee; 0.50% exit fee waived on refinancing with an affiliate of the lender
- 36-month initial term with two 12-month extension options, subject to debt yield tests
- Interest-only throughout, with a 12-month interest reserve funded at close
- Monthly draws against architect and quantity surveyor certification
- Completion guarantee from the developer; no repayment guarantee from the family office
- Open to prepayment from month 24 without penalty, preserving the CMBS takeout route
Indicative terms were received from three lenders within three weeks. The facility closed 19 weeks from instruction.
Hectocorn Engagement
Two problems had to be solved simultaneously: an underwriting model that survived scrutiny, and a sponsor covenant that a construction lender could accept. Our work covered:
- Rebuilding the trading model on a normalised basis, excluding World Cup comparables entirely and stress-testing against a 2.2% national RevPAR growth assumption
- Structuring the sponsor covenant so the developer — who had genuine South Florida construction credentials — carried the completion guarantee, while the family office contributed capital without recourse
- Bringing in an experienced third-party hotel operator on a management agreement with performance tests, closing the hospitality experience gap in the sponsor group
- Negotiating the offshore LP structure with US tax counsel to avoid adverse withholding treatment on distributions
- Approaching debt funds and balance-sheet lenders with demonstrated South Florida hospitality construction appetite, deliberately excluding CMBS conduits at this stage of the asset’s life
- Negotiating the interest reserve and extension tests so a delayed opening would not create a technical default
Three lenders issued terms. The competition moved the margin 75 basis points from the opening quote and secured the prepayment flexibility that protects the takeout.
Impact
The facility allowed the joint venture to:
- Begin construction on schedule, holding the general contractor and brand agreements already signed
- Preserve $52 million of equity as the full sponsor contribution, with no further capital call built into the structure
- Insulate the family office from completion risk while keeping its economic participation intact
- Retain a clean exit to CMBS or agency debt on stabilisation, where fixed-rate hotel paper was pricing from around 6.25%
- Establish a US hospitality lending relationship for the sponsors’ subsequent projects
The transaction shows how a sponsor group with the right components in the wrong configuration can still be financed. Separating construction risk from capital contribution, and adding operator expertise the group did not have internally, turned a proposal several lenders had declined into a competitive process.
Key Deal Highlights
Facility type: Senior construction loan
Facility amount: $96,000,000
Total project cost: $148,000,000
Sponsor equity: $52,000,000
Loan-to-cost: 65%Â
keys: 185
Price per key: c. $800,000
Margin: Term SOFR + 450 bps
Reference rate at close: SOFR 3.64% (23 July 2026)
Indicative all-in cost: c. 8.1%
Arrangement fee: 1%
Term: 36 months + two 12-month extensions
Amortisation: Interest-only throughout
Interest reserve: 12 months, funded at close
For more on construction finance solutions for cross-border Hotels, get in touch with Hectocorn.
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Frequently Asked Questions
Senior construction debt for US hotels is generally written at 60–75% of total project cost. Sponsors with a demonstrable hospitality development record sit at the upper end; first-time hotel developers should plan around 60–65% unless a mezzanine layer is added. Some specialist lenders will stretch to 85% of cost, but that pricing reflects the risk. Land contributed at cost rather than at appraised value usually improves the loan-to-cost calculation, which is worth structuring for before you approach lenders.
Floating-rate construction and bridge debt for hospitality is priced over Term SOFR, which stood at 3.64% as at 23 July 2026. Spreads have generally run from 350 to 600 basis points depending on leverage, sponsor quality and construction complexity — producing all-in rates roughly between 7% and 9.6%. Expect a 1% origination fee as standard and an exit fee that is often negotiable, particularly if the lender has an affiliate that could provide the takeout financing.
Not without adjustment. Miami’s 2026 numbers were inflated by World Cup demand — ADR rose 51.1% year-on-year to $267.87 in the peak period while occupancy stayed flat at 73.5%, which tells you the growth was entirely rate and entirely event-driven. Lenders will normalise those figures, and a model that does not do so first will damage your credibility in credit. Underwrite to a normalised year, show the event upside separately as a sensitivity, and you present as a sponsor who understands the market.
Yes, and it is common in South Florida, where Latin American and European capital is a significant part of the investor base. The structuring issues are US withholding tax on distributions, FIRPTA on eventual disposal, and whether the lender needs the offshore partners inside the guarantee perimeter. These are all workable, but the ownership structure needs to be settled before term sheets are signed — restructuring afterwards is expensive and can reopen credit approval.
Two routes dominate: sale on stabilisation, or refinancing into longer-term fixed-rate debt. Hotel CMBS in 2026 has been pricing from around 6.25% for stabilised assets at 65% loan-to-value or below, with full-service hotels generally in the 6.50–7.50% range. The critical point is negotiating prepayment flexibility into the construction facility from the outset. A construction loan that locks you in for its full term can cost you the entire benefit of a favourable refinancing window.
Four to six months from instruction to closing is realistic for a nine-figure ground-up hotel. Indicative terms typically arrive within two to four weeks of a complete information package. The timetable is driven by third-party reports — appraisal, market study, plan and cost review, environmental — and by the lender’s construction consultant signing off the budget and programme. Sponsors who have their cost plan, contractor agreement and operator documentation ready before approaching lenders routinely save four to six weeks.
IMPORTANT: The case studies featured on our website are based on genuine client enquiries and transactions handled by Hectocorn. All personal and identifying details have been anonymised to protect the privacy and confidentiality of those involved.
Case studies are published for illustrative and marketing purposes only, to provide context around the types of financing we arrange and the outcomes we achieve for our clients. In some instances, a case study may draw on elements from more than one transaction to better illustrate a particular scenario.
Please be aware that not every enquiry we receive results in a completed transaction. Where a case study is based on an enquiry rather than a concluded piece of business, this does not represent a completed deal. The publication of any case study on this website should not be interpreted as confirmation that the underlying transaction was finalised.