Rendering of the upcoming AC Hotel Knoxville Downtown showcasing modern design.
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 (CHC) has successfully secured a substantial $39 million in construction financing for the upcoming AC Hotel Knoxville Downtown. This financing is significant as it covers up to 75 percent of the total costs associated with the project, operating on a non-recourse basis. This arrangement showcases a strong financial backing, essential for the smooth progression of the innovative hotel establishment.
A creative financing structure involving Commercial Property Assessed Clean Energy (CPACE) has been integrated into the project. This approach not only allows for future funding options but is also designed to minimize the overall CPACE interest expense. Such flexible financial strategies are becoming increasingly important in today’s construction landscape, where managing costs effectively is crucial for project viability.
The AC Hotel, being developed by Vector Hospitality Inc., is slated to open in the winter of 2026. This new hotel will feature an impressive seven-story structure comprising 161 rooms. The design of the hotel promises to incorporate flexible and open spaces that are enhanced with modern finishes. These aesthetic choices aim to elevate the guest experience while ensuring a functional environment for visitors.
In a unique offering, the property will include a rooftop bar and kitchen, providing stunning panoramic views of iconic local landmarks, such as Neyland Stadium and the Sunsphere. Such amenities are expected to attract not only hotel guests but also local patrons looking for a vibrant social setting.
The design concept for the AC Hotel reflects a harmonious balance between historic and contemporary elements, mirroring the character of Knoxville itself. This approach aligns the hotel with the city’s rich heritage while embracing modern design trends, creating a distinctive atmosphere for guests.
As construction financing poses challenges, especially for project loans exceeding 70 percent of total project costs, CHC emphasizes the weight of various factors in achieving successful financing. The effectiveness of attracting multiple financing options can be attributed to the strength of the development sponsor, the affiliation with a reputable brand, and strategically choosing the project’s prime location.
Construction for the hotel project commenced in March 2025 and is anticipated to be completed by November 2026. This timeline indicates a structured approach to ensure that the project remains on track and adheres to planned milestones. Furthermore, the integration of C-PACE financing will facilitate the installation of energy-efficient systems throughout the hotel, including advanced HVAC, improved building envelope designs, LED lighting, and water-conserving plumbing features.
The AC Hotel is strategically positioned to cater to a growing demand generated by nearby institutions, including the University of Tennessee and regional healthcare facilities. This prime location underscores the project’s potential to attract a steady stream of guests, contributing positively to both the local economy and the hospitality sector.
As the development of the AC Hotel Knoxville Downtown unfolds, it stands to play a crucial role in shaping Knoxville’s hospitality landscape. The combination of a well-planned design, sustainable construction practices, and its prime location lends promise for a successful and rewarding project.
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