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What Is Mezzanine Financing for Hotel Loans?

HIEX-Tavares-FLMezzanine 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.

Why the Real Estate Private Equity Firm Industry Is Focused on the Hospitality Industry

Courtyard-Grenta-LAA newfound interest in the hospitality industry is fueling growth in private equity firms across the U.S. This reflects the relatively conservative approach still in effect at many banks and major lending institutions, which provides openings for a savvy real estate private equity firm to supply capital for hotels and other hospitality businesses. Here are some of the most important reasons for the current resurgence in private equity investments in the hospitality industry.

A Wide Range of Investment Options

Along with top-end performers in the U.S. and around the world, private equity investors are also able to access opportunities in the low-budget hotel marketplace. This can allow a more measured approach to investments in this volatile sector of the real estate investment field. By opting for the appropriate level of risk and choosing their hotel lending investments wisely, investors can optimize their returns while maintaining a healthy portfolio of balanced risks.

Partnership Opportunities

One of the best options for a smaller private equity real estate firm is to partner with companies already in the hospitality investment business. This can provide a valuable buffer against downturns in this marketplace while ensuring that investors can participate fully in this side of the commercial real estate marketplace.

Increased Prospects for Profitability

Real estate private equity firm investors can also access increased opportunities for profit taking and, in some cases, added control over the direction of the hotels in which they invest. By expanding their real estate investment portfolio to include hotels, motels and long-term lodging providers, these investors can often boost their overall profitability while enjoying a more diversified array of investments.

Benefits for the Hospitality Industry

For hotels and businesses that offer lodgings for travelers, acquiring new streams of capital investment can allow for expansions, renovations and debt restructuring to ensure greater profitability for their ongoing operations. This could represent a win-win scenario for investors and for hotel owners and managers alike. Improved cash flow and access to necessary capital resources from a real estate private equity firm can help hotels compete more effectively in today’s diverse hospitality marketplace.

At Stonehill Strategic Capital, we specialize in providing lending solutions for hotels across the country. We work with large hotel corporations and chains as well as smaller enterprises with a personalized approach to the hospitality industry. We can restructure, recapitalize and reposition your company for maximum financial flexibility and increased power in the hotel world. Whether you need bridge loans, mezzanine loans or permanent hotel loans, we can create a lending solution that is just right for your needs. Give us a call today at 713-666-2544 to discuss your needs with our financial experts. We look forward to the opportunity to do business with you.

Underwriting Basics of Hotel Lending

westinFinding the right hotel lending solutions can boost your profitability in the competitive marketplace. Understanding the complex hotel underwriting process can be a good first step toward qualifying for the funding you need to expand or to refinance your hotel. Here are some key points to remember about your hotel financing options and the best ways to qualify for underwriting for your hotels and other commercial properties.

Flags and Franchises

Hotels with recognizable names are more likely to attract customers and achieve profitability than comparable properties not affiliated with a franchise. Known as flagged hotels, these franchise enterprises offer added assurances to your guests of consistent quality and reliable service. Your chances of achieving favorable terms for your hotel financing arrangements are greater as part of a well-known chain or national franchise. If your franchise agreement is up for renegotiation in the near future, you may be best served to extend your franchise agreement early or to discuss terms with your lender to determine the best course of action for refinancing your hotel.

Location

A desirable location can also help you qualify for hotel refinancing arrangements. Your underwriter will look at the real value of the property as well as its revenue-generating potential. This can significantly affect your ability to achieve refinancing on reasonable terms and could increase your opportunity for success in this complex process.

Historical Performance

Traditional hotel underwriters also look at the current and historical performance of the hotel to determine whether hotel lending options are a risk-appropriate choice for the lending company. In some cases, working with a real estate private equity firm can provide greater flexibility and added options for hotel owners. These investment companies can typically accept greater risk and may be more likely to approve your hotel refinancing application.

Equity

The amount of equity you have accrued may also play a role in the ease with which you can obtain underwriter approval for your hotel refinancing application. Providing your lender with complete documentation on the status of your current loan can ensure that your application receives the consideration it deserves.

At Stonehill, we specialize in providing creative lending solutions for the hospitality industry. We offer debt financing, refinancing, funds for acquisitions and for renovations and all your other hotel lending needs. Our extensive experience and flexibility make us an excellent choice for refinancing debt or accessing cash for needed renovations to your hotels. If you need permanent, mezzanine, bridge or preferred equity loans, give our team members a call today at 713-666-2544 to discuss your situation with us. We look forward to the opportunity to provide the financing your hospitality business requires.