Cronheim Hotel Capital Secures $39 Million for AC Hotel Knoxville

News Summary

Cronheim Hotel Capital has secured $39 million in construction financing for the AC Hotel Knoxville Downtown project. This amount covers 75 percent of project costs and includes an innovative CPACE program for future funding. Scheduled to open in winter 2026, the seven-story hotel will feature 161 rooms, a rooftop bar, and modern design appealing to business and leisure travelers. Construction began in March 2025, with a focus on sustainability and energy-efficient systems, catering to the needs of the University of Tennessee and local healthcare facilities.

Cronheim Hotel Capital Secures $39 Million Financing for AC Hotel Knoxville Downtown Project

In a significant development for the hospitality sector, Cronheim Hotel Capital has successfully secured $39 million in construction financing for the new AC Hotel Knoxville Downtown. This financing covers up to 75 percent of the total project costs on a non-recourse basis, providing a solid foundation for the development of this modern hotel.

The financing arrangement includes a creative CPACE (Commercial Property Assessed Clean Energy) structure. This innovative financial tool enables the hotel project to access future funding. The goal is to minimize the total CPACE interest expense, ensuring that costs associated with energy efficiency are managed efficiently.

The AC Hotel is being developed by Vector Hospitality Inc. and is scheduled to open its doors in winter 2026. The hotel will feature a seven-story building with 161 rooms, designed to provide a comfortable and contemporary experience for guests visiting Knoxville.

Modern Design and Amenities

The design of the hotel emphasizes flexible, open spaces paired with modern finishes. One of the standout features will be a rooftop bar and kitchen, offering visitors panoramic views of landmark locations such as Neyland Stadium, the Sunsphere, and the vibrant cityscape of Knoxville.

According to the president of Vector Hospitality, the design concept aims to showcase Knoxville’s unique combination of historic and contemporary elements, creating a welcoming atmosphere for guests. This focus on local character is set to elevate the hotel’s appeal, particularly for tourists and business travelers.

Challenges in Securing Financing

The current financing environment presents challenges, particularly for project loans exceeding 70 percent LTC (loan-to-cost). The president of Cronheim Hotel Capital noted that the strength of the project sponsor, the brand recognition, and the prime location of the hotel significantly contributed to the ability to source various financing options that provided attractive leverage for the investment.

Construction Timeline and Eco-Friendly Features

Construction for the AC Hotel project commenced in March 2025 and is anticipated to reach completion by November 2026. As part of its commitment to sustainability, the hotel will utilize the C-PACE financing for the installation of energy-efficient systems. These systems include advanced HVAC, enhanced building envelope designs, LED lighting, and water-conserving plumbing.

Meeting Local Demand

This new hotel will effectively cater to the growing demand generated by nearby institutions, notably the University of Tennessee and regional healthcare facilities. With a focus on both leisure and business travelers, the AC Hotel Knoxville Downtown aims to serve as a convenient and modern accommodation option for a wide range of visitors.

The successful financing and upcoming construction mark a significant investment in Knoxville’s hospitality landscape, promising to elevate the area’s offerings with a hotel that not only emphasizes modernity and comfort but also respects the local heritage and sustainability goals.

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Additional Resources

• Lodging Magazine: Cronheim Hotel Capital Secures Funds for Construction of AC Hotel Knoxville Downtown
• Wikipedia: Knoxville
• Rebusinessonline: Cronheim Hotel Capital Secures $39M Construction Financing for AC Hotel Knoxville Downtown
• Google Search: Knoxville hotels
• PR Newswire: Petros Pace Finance and Midcap Financial Provide Financing for Newbuild Marriott Hotel in Knoxville
• Encyclopedia Britannica: Hotel Development Financing
• Knox News: Knoxville Construction Near World’s Fair Park
• Google News: Knoxville hotel construction