Already on ArticleSlash?

Forgot your password? Sign Up

Hotel Loans - The Guidelines Are Changing

 


Visitors: 230

It's March 2008 and I'm currently working on a rate and term refinance, $3.8 million of an owner occupied Wingate Hotel in the Midwest. The owner boasts an 82% occupancy for 07, $2,000,000 of gross income, property was built in 02 for a cost of $5.3 million so we're looking at a loan to value of approximately 63-67% depending on the appraisal works out. No issues on the transaction like bad credit, liens, judgments - nothing. Slam dunk transaction, right? Find the best lender with the best terms, rate and call it a day.

Not so, of the top ten banks in this arena, rather than the enthusiastic expected response of the bank representative snoozing me for the package, I'm getting more of the “we don't want to create any more enemies right now" and the “we just really want to wait and see how the issue on Wall Street shake out before we start reviewing packages and quoting rates. " Definitely a disappointing reality check to say the least.

The borrower on this particular transaction was quoted 6.5% on a nonrecourse, 5 year fixed, 10 year term, 25 year amortization loan from a major national hotel lender 3 weeks ago - that lender/deal has been taken off the table. The 7.5% -7.25% that I have been able to find has not been received well as the borrowers expectations where set in the mid 6's%.

In general, on a cash out basis, borrowers can now expect a max 65% if not more like 55% that's currently market. Rate and term refinances now need a good story and borrowers can expect to still get a loan closed at 70% but will get market rates/terms at 60-65%. DCR's that we could get away with at 1.3 now have been changed to a real 1.4.

Historically Hotel Loans come in and out of favor with lenders more so than with any other building type. There has been a tremendous amount of volatility in the market over the years and the banks seem to have already pulled the plug, for the most part.

More startling is that we have talked to many experts in this arena, on a daily basis, and everyone seems to be in a state of shock and confusion. Normally it's the wait 6 months and we should be back to normal. Currently it's more the attitude of “we don't know".

In general, if a hotel owner thinks that they may need to refinance and or purchase a new hotel, it may be wise to get started immediately as it may be a few years before we get back to rates/terms that we are still at today.

Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He specializes in Commercial Real Estate Loans between $400,000 - $5,000,000. Offers unique loan programs such as Commercial Second Mortgages, Commercial 30 Year Fixed and 90% non SBA financing, Commercial Equity Lines. 248 885-8797 or at Hotel Loans or commercial real estate loans

(496)

Article Source:


 
Rate this Article: 
 
Three Rio De Janeiro Hotels - Copacabana Palace, Hotel Gloria and Hotel Novo ..
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

IRS Revised Guidelines for Student Loans and Delinquent State Taxes - 20/20 Tax .

by: Ian K Jackson (September 26, 2014) 
(Finance/Taxes)

Bad Credit Surgery Loans Cash For Changing Your Outlook

by: Sam Goodliff (July 03, 2008) 
(Finance/Loans)

Business Loans For Women A Facility For Changing Demands

by: Carmen Cortez (July 08, 2008) 
(Finance/Commercial Loans)

Jumbo Mortgage Loans Approvals Are Still Available As Guidelines Tighten and ..

by: Bill Burress (September 26, 2008) 
(Finance/Mortgage Refinance)

Get Car Loans Without Credit History-changing Trends In Auto Loan Policies

by: Lowell Riggs (March 23, 2015) 
(Finance/Auto Loans)

Changing Oil and Changing Times - The Independent Auto Repair Service Dilemma

by: Jack Deal (April 01, 2008) 
(Business/Small Business)

Changing Business Plans with Changing Interests of Investing Firms

by: Rashmi Yadav (February 17, 2011) 
(Business/Strategic Planning)

Personal Unsecured Loans- Assistive Guidelines For Personal Finance

by: Deepak Kulkarni (July 17, 2008) 
(Finance/Unsecured Loans)

Changing Attitudes To Credit In A Changing Economy

by: Matthew Pressman (March 12, 2008) 
(Finance/Credit)

Three Rio De Janeiro Hotels - Copacabana Palace, Hotel Gloria and Hotel Novo ..

by: Hakan Almerfors (August 09, 2008) 
(Travel and Leisure/Hotels Accommodations)