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 has successfully obtained $39 million in construction financing to support the development of the AC Hotel Knoxville Downtown. This funding covers up to 75 percent of the overall project costs on a non-recourse basis, marking a significant step forward for the anticipated hotel.
The innovative financing structure includes a Commercial Property Assessed Clean Energy (CPACE) program, which will facilitate future funding aimed at reducing total CPACE interest expenses. This creative financing approach enhances the project’s sustainability while optimizing its financial framework.
The hotel, which is slated to open its doors in winter 2026, will be constructed by Vector Hospitality Inc.. Envisioned as a seven-story building, the AC Hotel is designed to include 161 rooms, providing a modern lodging experience in the heart of Knoxville.
The architectural plans feature flexible and open spaces, showcasing contemporary finishes that appeal to both business and leisure travelers. One of the hotel’s standout features will be a rooftop bar and kitchen, offering guests panoramic views of prominent local landmarks, including Neyland Stadium and the iconic Sunsphere.
The location of the hotel is strategically placed to attract guests from nearby institutions, particularly the University of Tennessee and regional healthcare facilities, indicating a strong demand for accommodations in the area.
Vector Hospitality intends for the design concept of the hotel to encapsulate Knoxville’s distinctive blend of historic charm and contemporary influences. This commitment to local architectural integrity aims to create a welcoming environment for all visitors.
In today’s economic climate, securing construction financing can be particularly challenging, especially for projects requiring loans exceeding 70 percent of loan-to-cost. However, the project’s location, the strength of its sponsorship, and its brand affiliation contributed to an array of attractive financing options, enabling CHC to secure favorable leverage.
Construction of the AC Hotel Knoxville Downtown officially commenced in March 2025, with an anticipated completion timeline extending to November 2026. The implementation of the CPACE financing is expected to support the installation of energy-efficient systems, which may include advanced HVAC designs, enhanced building envelope solutions, LED lighting, and water-conserving plumbing infrastructures. These initiatives are designed to propel the project toward a sustainable future while reducing operational costs.
The development of the AC Hotel Knoxville Downtown signifies a promising addition to the area, addressing the growing need for quality accommodations catering to both academic and healthcare sectors. As the project progresses, the focus remains on delivering a hotel that embodies Knoxville’s rich culture while embracing modern amenities and sustainability practices.
With the collection of financing secured, the involved parties can now concentrate on the construction phase, striving to meet the planned opening schedule, thus reinforcing Knoxville’s burgeoning reputation as a desirable destination.
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