Case Study: Windemere - Veterans Behavioral Health Center Conversion

Windemere Veterans Behavioral Health Center Conversion

 

Overview

Swoboda Hospitality Specialists was retained by Veterans Wellness Center, LLC to represent their company on the purchase of The Windemere Hotel and Conference Center located in Sierra Vista, AZ. Our Client's desire was to convert this full-service hotel into a Residential Behavioral Health facility for veterans.

Challenges

The full service hotel was overpriced based on current operating revenues and net operating income. During the process of processing Municipal Bond Financing, it was determined, by the bond underwriters that the military base located in Sierra Vista was on the list of potential closings by the government. This resulted in the bond financing not being approved. With an excessive prepayment penalty, combined with the under performance of the hotel, conventional financing was also unavailable.

Goals

Finding a way to enable our Client to purchase the hotel and process its conversion to a Residential Behavioral Health facility, in order to provide the much needed care and assistance to our Veterans.

Results

Swoboda Hospitality Specialists was able to negotiate a Lease/Purchase Option agreement with the owner. This was accomplished by a NNN Lease at a monthly rental that allowed the Owner to continue the payment of the debt service to the existing Lender, while allowing the time constraints of the excessive prepayment penalty to expire. The Lease also included a thirty (30) month Purchase Option at the Owner’s established price.

Our Client would then be able to have the required time needed to stabilize the Net Operating Income of the Residential Behavioral Health facility, which would allow our Client to reapply and secure approval for Municipal Bond Financing. This process would also enable the Owner of the hotel to sell the asset at full asking price.

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