You might associate hotel construction financing with new construction where you build a brand new hotel from the ground up. However, this type of financing can also be used for major renovations to hotels. For instance, many investors are buying distressed properties and giving them a major makeover to make them profitable again. In this article, we’ll discuss hotel construction financing and how to use it for distressed hotels.
If you need hotel financing, contact us to discuss solutions.
What is Hotel Construction Financing?
Hotel construction financing is a special type of hotel loan designed to use for construction and major renovations. These loans are generally short-term to cover the costs for the duration of construction. After that, most groups refinance through a permanent loan or through other options.
With commercial construction loans, you don’t get the full amount in one lump sum. Instead, generally you get chunks of the loan amount before each phase of the construction project. So, for instance, you might get some money to pay the designer, engineer, and architect and then once the designs are done you’ll get another chunk to pay for materials and initial construction costs. This is true whether you’re using hotel construction financing for ground up construction or whether you’re using it for major renovations.
Of course, loan details vary from lender to lender, but here are some things to know about hotel construction loans from Stonehill:
- Loan amounts between $15 million and $100 million
- Loan term up to 5 years
- LTC up to 75%
- LTV up to 75%
- Interest starting at 11%
Using Hotel Loans for Renovations on Distressed Properties
One reason you might seek hotel construction financing is if you need to do serious renovations on a hotel. For instance, many investors are buying up distressed hotels that went into bankruptcy around the start of the pandemic. Often, these properties need a significant amount of construction work to make them profitable again. They often had years of neglect before finally closing down with travel restrictions. However, it’s possible to breathe new life into them and turn them into prospering properties again.
With distressed hotels, they may need renovations to modernize interior design and create design elements that match the new brand. This may involve major renovations to hotel rooms, entrances, lobbies, and dining or lounge areas.
Additionally, some distressed properties may need more structural renovations to bring them up to current standards. Some may not be up to code for things like accessibility or building codes. They may also need upgrades for plumbing, electrical, and HVAC systems to ensure these systems are reliable.
Therefore, there’s a lot of different ways you can use hotel construction loans to revamp distressed hotels and bring them back to a profitable state. The key is to make sure all the work will help make the hotel successful again.
Stonehill – Your Hotel Lending Partner
When you need financing for your hotel, contact Stonehill for your needs. We specialize in hotel lending and offer creative solutions to all your financing needs. Whether you need construction loans, permanent loans, or bridge loans, we have options to fit your situation. Our team offers years of experience and have lent over $5.1 billion since our founding. Get financing today by contacting our team for assistance.