Working with superior owners, operators, and sponsors since 2003
Each transaction is unique. That’s why we pride ourselves on being masters of detail and captains of strategy. Although not an exhaustive list, the below touches on key areas where we advise clients with our expertise.
A hotel is a good candidate for acquisition if it is underperforming due to poor management, has deferred renovations or deferred maintenance, demographic changes, or is in need of a flag change. Stabilized prosperities with healthy cash flow are also a strong acquisition target.
hOTEL Conversion fINANCING
Hotel conversions are a type of hotel renovation in which a hotel converts to a different flag, or a non-flagged property becomes a flagged property. Managed hotel conversions are financed by the parent corporation, and franchise conversions are typically refinanced through the franchisor. However, in some cases, a hotel conversion may require external funds, as when a flagged hotel becomes a non-flagged one.
Hotel Construction Financing
We try to maximize leverage in any construction scenario and are known for being creative in marrying a senior loan with a mezzanine loan to amplify proceeds and to reduce equity investment.
Hotel rENOVATION fINANCING
Hotel renovation financing pays for improvements that increase the value and life of the hotel. Though it’s possible to self-fund renovations through operational cash flows segregated in renovation reserve accounts, many, if not most, hotels prefer to finance hotel construction renovations externally. PIP obligations require franchisees to maintain hotels to brand standards, which can require a significant amount of renovation financing.
Another source of renovation financing is a mezzanine loan of subordinated debt. This debt resides below senior debt and above equity on the capital stack.
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the rights to convert to an ownership or subordinate debt in the company in case of default, after the senior lender is paid.
Banks are one of the primary sources of brokered hotel loans from $3 million to $500 million and beyond. Hospitality Funding uses an extensive network of local, regional, and national banks for loans to build a hotel (hotel construction financing), buy a hotel (hotel acquisition), refinance a hotel or renovate a hotel. Other sources include CMBS lenders, insurance companies, and private lenders for construction, acquisition, and renovation.
We look forward to discussing your next project.