The right approach to refinance your hotel loans will provide you with the best options for your financial needs. Understanding the criteria used by lenders is essential to ensure the best possible results. Keep in mind a few key points when planning to refinance loans in the hospitality industry.
Timing Is Critical
Taking a good look at the terms of your loan and assessing the best time to refinance is essential to protect the financial health of your company.
- Checking to see if commercial interest rates are increasing or decreasing can determine the right timing for your refinance application.
- If you have a balloon payment scheduled for your current hotel financing arrangement, be sure to leave adequate time before this payment is due. This can ensure that your refinancing options and loan is in place before this payment comes due.
Making sure the timing is right for your application will help you achieve the most favorable terms for your refinancing arrangement.
Consider All Your Options
Depending on the age of your current loan, you may be eligible for a Small Business Administration (SBA) refinance arrangement. SBA 504 loans are available for hotel renovations and new acquisitions. SBA loans are generally available at lower rates than those offered in the general hotel lending marketplace. Working with a financing company that specializes in the hospitality industry will help you obtain the right loan arrangements for your needs.
Check the Terms Carefully
A hotel loan is a long-term financial arrangement. Making sure that all the terms are manageable and that they suit your needs is critical to your ongoing financial stability. Working with an established lending company is the best way to find the right hotel loans. Your loan advisor has the experience and knowledge to help you determine refinancing arrangements that best fit for your needs and current financial situation.
Stonehill is a direct hospitality lender with a proven track record for delivering the right hotel loans for our customers. We offer hotel lending solutions that include mezzanine loans, bridge loans, preferred equity and permanent loans ideal for your company’s specific needs. Call us today at 713-666-2544 to schedule a consultation with us. We look forward to the opportunity to serve you.
An accurate valuation of your hotel’s worth is often necessary to obtain hotel financing arrangements and provide added information for owners, investors and stakeholders. Understanding the valuation methods used to determine this figure can help assess the current value of your hotel more effectively. This can allow you to make practical business decisions regarding acquisitions, renovations and hotel financing options.
Three Primary Valuation Methods
Real estate appraisers and hotel valuation firms typically use one of three methods to determine the actual value of a particular property. These three methods may be tweaked to produce accurate information about the hotel’s value in the market.
- The income approach for valuation looks at cash flows and uses a predictive method to determine the likely revenue streams for the hotel. This can help in determining hotel loans based on valuation of an existing property. Past results are not a guarantee of future performance. However, lenders often request historical data on occupancy rates, profits and revenue streams when applying the income approach to property valuation.
- The cost approach is based on the idea that the hotel is worth as much as it would cost to rebuild less any depreciation. The value of the land on which the hotel sits will also be factored into this valuation.
- The market comparison approach uses comparable properties in similar markets to determine the most accurate selling price for a specific hotel. The amenities, physical characteristics, size and capacity of the hotel will be taken into consideration. Special features or distinctive advantages or disadvantages of the property will also be considered.
Each of these methods can provide valuable information on the actual worth of your hotel investments. With accurate information, the likelihood of success in acquiring hotel construction financing for new projects or acquisitions increases.
At Stonehill, we offer many hotel financing options for investors. We work with our clients to ensure the best lending solutions for every need. Our commitment to going above and beyond for those we serve is demonstrated in every transaction we handle. If you need hotel financing, call Stonehill today at 713-666-2544. We look forward to the chance to serve you.
Acquiring the right hotel construction financing is essential to achieve solid returns on your financial investment. A thorough approach will help your company secure the best loan options for an acquisition, construction or renovation project. A few key strategies are required to bolster your chance of obtaining competitive loans and terms.
Know What You Want
The first step in your loan acquisition process is to determine the amount of funding needed and terms that will be most favorable. Achieving a clear idea of what is needed helps tailor the loan application to your own specific set of needs.
Organize Your Documentation
Before applying for hotel financing, be sure to organize data and documentation in a clear and easy-to-understand way. Preparation and organization give a positive impression on potential lenders, which will increase the likelihood of acquiring hotel loans on the terms you prefer.
Create an Executive Summary
An executive summary is a condensed version of the details of your project plan and loan proposal. This document is designed to streamline the evaluation process for lenders. An executive summary makes it easy for lending companies to assess your financing proposal quickly. This may increase the odds of success in acquiring preferable hotel construction financing.
Perform the Necessary Research
A competitive set is a list of properties that are comparable with the hotel property your company intends to develop. Obtaining historical data and details on available amenities with competition will help your company compare market trends to support your lending request. Market research on average rates, revenue and occupancy levels ensures a profitable investment and supports the funding requests to lenders.
At Stonehill Strategic Capital, we specialize in providing lending options for companies throughout the hospitality industry. We offer bridge, mezzanine, permanent, preferred equity and Small Business Administration lending options tailored to the precise needs of our clients. As a leading direct hotel lending institution, Stonehill provides the best solutions and the proven experience for your next project. Call us today at 713-666-2544 to discuss hotel construction financing with our knowledgeable loan originators. We are here to serve you.
Some of the most iconic and luxurious hotels in the world are undergoing renovations and updates to ensure their continuing success in the hospitality industry. The right hotel financing options are critical to provide financial support for these major projects. Many large-scale renovations and reconstructions are occurring in the hotel industry this year.
The Hotel Okura in Tokyo
A landmark location next to the U.S. embassy in Tokyo, the Hotel Okura began reconstruction in 2015 and is expected to reopen in September 2019. The project is estimated to cost $979 million and will feature two new towers with a combined total of 18 stories worth of office space.
The Mandarin Oriental in Hyde Park, London
With a grand reopening date sometime in Spring 2019, the Mandarin Oriental will hope for better luck with this renovation project. After completing an upgrade and refurbishment project in 2018, the newly remodeled hotel was severely damaged by fire just one week after its opening. Three bars and a spa and fitness center opened in December 2018.
One Aldwych in Covent Garden, London
Another London property, One Aldwych in Covent Garden, will enjoy an update courtesy of designs by Robert Angell, a leading creative force in the hospitality industry. There is no word yet on the type of hotel construction financing chosen for the upgrade to the 150 rooms of this establishment. Four new suites and enhanced technological support are among the most important changes to this London icon.
The Grand Hotel Quellenhof in Switzerland
Closing in February 2019 and expected to remain offline for four months, the Grand Hotel Quellenhof is part of the Grand Resort Bad Ragaz. This is a popular stop for guests interested in spa treatments at the thermal waters of the Tamina gorge. Founded in 1869, the Grand Hotel Quellenhof is undergoing a much-needed update and renovation. The project is expected to cost about $42 million.
Raffles Hotel in Singapore
The renovations that began in 2017 are still underway at this instantly recognizable and iconic hotel. The Raffles Hotel will incorporate restaurants by famed chefs Anne-Sophie Pic and Alain Ducasse. The hotel will also feature soundproofed rooms and improved access to electric outlets. A careful balance has been struck, however, between the necessary upgrades and the classic aesthetic of this one-of-a-kind hotel.
At Stonehill, we offer innovative hotel loans designed to suit your needs and to help you make the most positive impression on your guests. We provide hotel financing for renovations, rebuilds and new acquisitions for clients in the U.S. and around the world. Call our office today at 713-666-2544 to discuss your hotel financing needs with us. We look forward to the opportunity to serve you.
Finding the right hotel loans help you make the most profitable investments in the hospitality industry. By monitoring current trends in the financial marketplace, you gain the understanding of right funding options for your upcoming acquisitions, renovations or expansions. There were many trends in the hotel lending marketplace for 2018 and 2019.
Increased Fluidity in the Hotel Financing Marketplace
While values and sales have remained strong throughout 2018, the hotel financing market has been booming for investors and hotel owners. Private equity arrangements are gaining in popularity for acquiring and financing larger chain hotels and franchises. For smaller hotels, alternative lending options are developing into the traditional financing marketplace.
A Slowdown in New Construction
Demand for hotel accommodations and new properties in many areas are strong. However, most experts believe that hotel construction financing will continue to see a downturn in 2019. At least part of the recent slowdown in new construction is associated with tariffs on building materials coming from overseas. This has led to slower growth in the hotel construction field and reduced the need for funding.
Increased Renovation and Refinancing
In 2018, lenders saw a marked increase in the refinance market. This trend is expected to continue through 2019, as hotel owners and investors hang on to properties rather than attempting to sell them. Rising interest rates also make accessing equity in existing properties more appealing than acquire financing for new hotel acquisitions. Finding the right hotel loans and solutions allow for flexibility in managing upgrades to existing hotel properties.
Shopping for the Right Lenders
For most real estate investors, the right lending has a significant impact on the profitability of their hospitality investments. For 2019, these investors are likely to be particular about the lenders they work with for their financing needs. Working with a leading company in hotel lending helps investors to obtain the right arrangements for their funding requirements.
As an established leader in the hotel lending marketplace, Stonehill provides a wide range of financial options for investors in need of solutions. We offer a variety of loans designed to suit the needs of our clients perfectly. Call us today at 713-666-2544 to discuss your hotel loans and financing requirements and to schedule a consultation with us. We look forward to the opportunity to serve you.
Selecting the right hotel financing can have a real impact on the success of your investment in these facilities. Determining whether equity or debt financing is the right choice for you can be a challenging task. Here are some tips on choosing the most practical loans and hotel financing options for your renovations, constructions or acquisitions in the hospitality industry.
Cost Advantage: Equity Financing
In most cases, equity financing can be obtained at a much lower cost than other hotel loans. By selling shares in your property, you can take advantage of your existing equity to access the funding you need to manage renovations and new acquisitions while keeping the costs as low as possible for you and your company. In some cases, the only out-of-pocket costs you will incur will involve the legal process necessary to transfer ownership interests in your company and the fees associated with that process.
Control Advantage: Debt Financing
While taking on additional debt may not be especially appealing for your business operations, equity financing arrangements may limit your ability to make unilateral decisions about your hotels and the ways in which they are managed and renovated. Taking on partners is always a balancing act between acquiring necessary capital and retaining control over your projects. Determining exactly how much control you are willing to surrender to access the funding available through equity financing is an essential step in determining whether debt financing or equity financing is the right choice for your project.
Convenience Advantage: Debt Financing
Opting for debt financing can provide you with added convenience when managing your hotel construction financing requirements. In many cases, you will have a greater range of options to choose from when selecting debt financing over equity financing. The process for debt financing is typically faster than that associated with equity finance arrangements, which can sometimes drag on for months while the various stakeholders and investors in your project provide the required information and funding needed to complete this process.
Access Advantage: Equity Financing
Business loans acquired through debt financing typically require an unblemished credit record and solid collateral for approval. By contrast, equity financing can be acquired through private investors who may not be as particular about the track record of the other investors. Because they are making an investment in a property rather than a borrower, equity investors can often overlook minor problems with cash flow and credit problems in the past.
At Stonehill, we offer practical financial solutions for the hospitality industry. We can provide access to debt and equity financing solutions that work for your business and your ongoing needs. Call us today at 713-666-2544 to discuss your hotel financing requirements with our experts. We look forward to the opportunity to serve you.
First impressions can have a lasting impact. Ensuring that your hotel makes the most positive impression on guests is essential to stay profitable and relevant in the modern hospitality industry. Regular updates and renovations may even be required by your franchise through a property improvement plan (PIP) agreement signed at the time of acquisition. Renovating your hotel can be an expensive process, however. Finding the right hotel loans can help you to manage the expense and disruption of these activities more easily to maintain greater productivity now and well into the future.
Hotel Financing for Renovation Projects
The U.S. Small Business Administration (SBA) offers loan programs for small to medium-sized businesses in the hospitality industry:
- SBA 7a loans are designed specifically for the acquisition of commercial real estate and are available in amounts up to $5 million and for terms of up to 25 years.
- SBA 504 loans work in a similar way but offer larger loan amounts of up to $20 million. The loan terms are shorter and range between 10 and 20 years.
The restrictions and paperwork associated with these government-backed loans, however, can be a significant deterrent for hotel owners and managers looking for the right hotel construction financing options. There are other options for financing hotel renovations in the lending marketplace:
- Refinancing your hotel can provide you with cash on hand to manage upgrades to furniture, fixtures and equipment or to fund structural improvements. This approach typically requires that you already have significant equity in your hotel and may require you to provide a detailed plan outlining what the funds will be used for during your renovation project.
- Business lines of credit can be used to fund smaller renovations, including updating signage and replacing flooring in selected areas.
- Conventional bank loans are often available for companies that have an existing relationship with the lending institution and a clean credit record.
- Bridge loans, as their name suggests, are designed to bridge the gap between necessary funding and the acquisition of longer-term or more favorable financing terms and arrangements.
Finding the right hotel loan for your planned renovations can help you manage these necessary tasks to keep your facilities looking their best for your guests.
Stonehill offers hotel loans designed specifically to suit the needs of the hospitality industry. We can design a renovation loan that is tailor-made to supply the cash you need for your upcoming renovation project. Our expert loan originators can provide you with the right guidance and financial solutions for your hotel. Call us today at 713-666-2544 to discuss your funding requirements with us. We look forward to the chance to serve you.
The right hotel financing arrangements can make a significant difference in the profitability of your investment. In some cases, however, obstacles may arise that could prevent you from obtaining the financing you need for your hotel acquisition or renovation. Here are some of the most common obstacles you may encounter when seeking financing for your hotel investment.
Past Credit Issues
Recent economic downturns have left many investors with credit issues in their past. This can reduce your chance of qualifying for hotel loans for acquiring new properties or renovating your current ones. Working with a financial company with solid and relevant experience in the hotel lending marketplace can ensure the best possible outcomes for your loan application.
Franchising Agreement Concerns
For investments in franchise properties, banks will often take a hard look at the agreements in place before agreeing to longer-term financing. Most franchise agreements are written to cover 10 years or less. Lending institutions may be unwilling to approve finance arrangements that extend beyond the length of the franchise agreement. They may also require a comfort letter from the franchisor that outlines the rights of the bank if the borrower defaults on the loan. The information provided by the franchisor can have a significant impact on your chance of approval for these loans.
Property Improvement Plans
Most hotel franchises require periodic updates and improvements to the hotels that operate under their name. Your lender may request information on upcoming property improvement plans (PIPs) and the cost of these renovations before making a decision about your loan application. Making sure you can provide the required information in a timely way can increase your chances of success in obtaining the funds needed for your acquisition or renovation project.
High Occupancy Rates and Projected Demand
It may seem counterintuitive, but occupancy rates that are perceived to be too high may reduce your chance of acquiring financing for your hotel investment. Occupancy rates of 80 percent or over may serve as an indication to lenders that the market is primed for additional development that could significantly reduce future returns on these investments. This long-term approach to lending could limit your ability to acquire the funds needed for your hotel investment.
Stonehill is a direct hospitality lender with proven experience and knowledge of the hotel lending marketplace. We work with investors to create the most practical and effective solutions for a wide range of lending needs, including permanent, bridge and mezzanine loans. Call us today at 713-666-2544 to discuss your requirements with an experienced and qualified advisor. At Stonehill, we look forward to serving you.
Investing in a franchise hotel can be a good way to diversify your portfolio and to achieve solid returns over an extended period of time. Finding the right hotel financing options can make this acquisition even more profitable. Comfort letters are designed to provide a legal framework for lenders and franchisors to handle situations in which the hotel purchaser defaults on the loan. Here are some facts every investor should know about comfort letters.
What Are Comfort Letters?
Comfort letters are documents that allow lenders to assume franchise rights if the original franchisee defaults on the loan. These letters include provisions that ensure that lenders can continue to operate the hotel in the event of default or foreclosure on franchise hotel loans.
Benefits of Comfort Letters
Comfort letters offer several benefits for all parties involved in the transaction, including the following:
- Borrowers are more likely to find the most attractive hotel lending arrangements if the lenders have greater certainty that they will be able to recoup their investment even if the borrower defaults. This can improve the terms of these loans and can make it easier to obtain the financing needed to acquire franchise properties.
- Lenders can more effectively collateralize their loans by ensuring the ability to maintain the profitability of the properties they finance.
- Franchise companies can protect their brand name by continuing operations and maintaining a presence even when franchisees fail to meet their financial obligations and go into default on their hotel loans.
Many lenders require comfort letters before they will finalize loans for franchise hotel properties.
Crafted by the Franchise Company
In most cases, the comfort letter is drawn up by the franchise company as part of the franchising process. These legal documents may follow a standardized template or may be customized to suit the needs of the borrower and the lender. The contents of the letter may include some or all of the following provisions:
- A provision that ensures the ability of the lender to appoint a receiver to operate the hotel for a short period of time during foreclosure proceedings
- A clause that allows the lender to cure any default of the franchise agreement before it is terminated
- A provision that allows for the resale of the property and the transfer of the franchise agreement to a third party if the hotel goes into default
These provisions are designed to protect the lender if the hotel financing loan goes into default.
Stonehill Strategic Capital is a direct lender serving the hospitality industry. We work with investors across the U.S. to provide the most practical hotel financing arrangements for their specific set of needs. Call us today at 713-666-2544 to discuss your financial needs with one of our expert loan originators. We work with you to provide the best options for your hotel financing requirements.
Mezzanine financing arrangements can provide added flexibility for developers and property owners when acquiring funds for their projects. These hotel loans are designed to put the equity or ownership stakes of a project to work by taking out a loan using these assets as collateral. This can provide ready funds for acquiring new hotel properties, resolving cash flow issues or constructing a new project.
How Mezzanine Loans Work
Mezzanine loans are considered to be high-risk hotel lending arrangements. For properties that already have a sizable first mortgage, finding a lender willing to take junior status to provide a second mortgage can be a challenging proposition. Mezzanine financing lenders do not offer mortgages. Instead, they are collateralized by a lien on the company that owns the property. This can allow the lender to act much more quickly in cases of default, which can provide added incentive for a real estate private equity firm or other investor to offer these lending arrangements.
The Structure of Mezzanine Loans
Mezzanine loans are generally issued for amounts of more than $1 million and can be structured as short-term or long-term mezzanine debt. Depending on the lender, interest may be figured as fixed rate, floating rate or amortized. Most mezzanine loans are designed as short-term floating rate interest-only arrangements to be repaid as quickly as possible.
Applications for Mezzanine Loans
Mezzanine loans are typically used for one of three purposes.
- These lending arrangements can provide added cash on hand for unexpected expenses or to pay off debts. The funds borrowed can be repaid out of the income generated by the hotel or other investment properties.
- Probably the most common use of mezzanine loans is to leverage equity to acquire another income-producing property.
- Mezzanine loans can also provide the funds needed to begin a new construction project.
By acquiring the necessary funding through mezzanine hotel loans, hotel owners and property developers can take advantage of opportunities in the real estate marketplace and can ensure the smoothest operations for their current holdings.
Benefits of Mezzanine Loans
In some cases, mezzanine loans may be available even for those who have been declined for traditional second mortgages. The way in which mezzanine hotel loans are structured and collateralized can make them a more attractive proposition for investors and lending firms.
At Stonehill Strategic Capital, we offer financial solutions tailored to the hotel industry. Our hotel lending experts can provide you with the right solutions for all your short-term and long-term financing needs. From bridge loans ranging from $5 million to $50 million to mezzanine loans up to $10 million, we can deliver the right options for your hotel and real estate development plans. Call us today at 713-666-2544 to discuss your financial needs with us. We look forward to the opportunity to serve you.