The financing market for hotels becomes unconstrained as the industry fundamentals continue to improve. Lenders still favor and elect experienced, knowledgeable owners and operators. The operating history for existing properties, the area trends for new and repositioned properties have to clearly sustain the loan amounts. Mortgage financing is available for properly structured deals.
Eligible Property Types
Full-Service, Limited-Service and Extended-Stay facilities with a minimum of 60 rooms.
Loan maturities are normally ten years. Other maturities will be considered on a case-by-case basis.
25-year amortization. 30 years will be considered on a case-by-case basis.
Debt Service Coverage Ratio (DSCR)
Minimum DSCR of 1.35:1 depending upon property type, age, physical condition, location and competitive market position.
The lesser of up to 70% (Limited-Service) or up to 80% (Full-Service) of MAI appraised value conforming to FIRREA and USPAP guidelines and up to 75% (Limited-Service) or up to 85% (Full-Service) of loan to acquisition cost (if applicable).
The Borrower will typically contribute monthly to an escrow account for real estate taxes and property insurance. The Borrower will usually also establish a monthly capital replacement escrow reserve equal to the greater of 4% of gross revenues or an amount to be determined by Lender on the basis of an engineering report and Lender’s site inspection. These reserves may be waived or capped in certain instances.
Minimum 3% of total revenues or 7% of room revenues.
Reserves at Closing
The Borrower will establish a remediation/repair reserve at closing equal to 125% of required deferred maintenance repairs as indicated in the engineering report and site inspection.
Here is the check list for Hotel and Lodging Commercial Loans:
1. Most recent trailing 12 month Income/Expense reports and statements in a standard Hotel accounting format.
2. Income/Expense Statements (last three years), along with monthly and annual figures.
3. Summary of all Commercial and Departments Leases, showing escalations and expirations, as well as a summary of the terms of any franchise agreements.
4. Complete Detailed physical description of the property, along with the site map, floor plan, and property survey, square footage.
5. If acquisition, provide the copy of fully executed contract of sale.(indicates the date).
6. If refi, price originally paid for property, date of purchase and summery of current financing..
7. Floor plan and photos of the property
8. Site plan and property survey.
9. Outlined recap of current financing (refinance only) including:
• Current lender
• Current principal balance
• Current interest rate
• Current monthly payment
• Due date
• Prepayment penalty information
10. Personal info and resumes info on the management and the owner.
9. Current personal financial statements (last three years)
10. Current Business financial statements (last three years). For business/entity with balance sheet.
11. Personal Tax Returns (last 3 years).
12. Business Tax Return (last 3 years).
12. Background and BIO for each partner and for the ownership entity emphasizing Hotel/Hospitality Industry, Real Estate experience.
13. Management company personal info, if separate from ownership.
14. Renovation history for last 3 years with project descriptions and approximate amounts of each project.
15. Current personal financial statements for partners who own 20% or more.