LOS ANGELES—Contrary to popular opinion, debt for hotel deals is available for credit-worthy individuals, says Jon Wright, president and CEO of Access Point Financial.
The Hotel Investment Barometer caught up with Wright during the Americas Lodging Investment Summit last month and asked for tips on securing hotel financing in today’s landscape. Wright said full disclosure is critical when a hotelier is applying for financing, particularly when working with a new lender.
“It’s important to provide complete and thorough information, including any potential issues or obstacles,” Wright said. “Simply put, the lender knows you’ve done your due diligence, are aware of possible challenges and prepared to deal with them.”
With recent forecast models showing growth in the hotel industry through 2016, savvy hoteliers will continue to find attractive deals, he said. Properties in peak operating condition historically have an advantage over others in their competitive set, and delaying renovations and upgrades could prove to be costly as revenue declines are imminent, he said.
Hotel Investment Barometer: Give us some examples of some deals you’ve worked on lately.
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| Jon Wright, Access Point |
Jon Wright: “Courtyard by Marriott Conyers, Georgia: APF was able to work with the ownership to a short-term bridge loan needed to complete the project. The total project cost was $5.5 million for acquisition of the property and construction completion.
“Cobb Galleria Inn converting to Holiday Inn Express Cobb Galleria (in Smyrna, Georgia): APF was able to work with the ownership group to successfully secure a short-term bridge loan in a financial market that had not fully recovered.”
HIB: What kind of debt is most available today?
Wright: “APF offers three types of financing: CapEx loans up to 100% of the cost of renovation for brand-mandated initiatives; bridge loans for low leveraged refinance or acquisitions paired with a renovation; and ground-up construction loans backed by conservative leverage and brand sponsorship.”
HIB: What are APF’s goals for 2013?
Wright: “We are looking at 2013 with tempered exuberance because we see continued opportunities for prudent financing in the industry. We are anticipating working on over 100 CapEx, bridge and development loans this year.”
HIB: How much debt are you looking to place?
Wright: “With our lending platform expecting to increase by at least $200 million in the first quarter, we feel confident in our ability to work with ownership groups and put together a customized financing solution best suited to their individual needs.”
HIB: How does this compare to 2012?
Wright: “2012 was a ramp up year for APF, and we anticipate double-digit growth.”
HIB: How are deals being structured today?
Wright: “Lenders are returning to the market, but true financing partnerships are built upon mutual respect, frank dialogue and a thorough understanding of each party’s needs.”
HIB: What kind of underwriting are you seeing?
Wright: “For CapEx financing, up to 100% of cost for brand-mandated improvements. Total debt on property not to exceed 80% of cost for new construction or 85% of value for an existing property. Three to 10 years fully amortizing—interest only available based on stabilization needs.
“For bridge financing (paired with a CapEx loan), total loan-to-value not to exceed 70%. Twenty-four months interest only with an option to renew for an additional 12 months. For new-construction mortgages, loan to cost not to exceed 65%.”
HIB: Are you expecting to see more CMBS activity in 2013?
Wright: “As interest rates remain low and hotel performance improves, we expect to see an increase of originations and loan placements in the CMBS Market. APF also expects to see increased opportunity from CMBS maturities in 2013.”