LOS ANGELES—The cyclical nature of the hotel business can’t be underestimated. Jon Wright, president and CEO of Access Point Financial, is experiencing it firsthand.
“Everything stalled out and the music stopped in ’08,” he said during a break at last month’s Americas Lodging Investment Summit. “Three years later, we are seeing friends of ours coming back.”
Those friends are visiting Wright, who has been involved in hotel lending since the early 1990s, to talk about securing debt during a time when little of it is available.Access Point in December closed on a senior secured credit facility with Wells Fargo Capital Finance that it will, in turn, reallocate to borrowers for hotel improvements, bridge financing and hotel construction. The deal with Wells Fargo puts Access Point in position to place $1 billion in loans by 2015.
Access Point is a direct lender providing loans starting from $200,000 for CapEx to $40 million for brand-sponsored construction programs. Hotels that are executing renovation programs also can combine low-leveraged first mortgages with Access Point’s CapEx financing, according to company literature.
Wright said the loans have terms up to 10 years, including interest-only payments for 12 months to 18 months while owners reposition hotels. The average loan for the company is approximately $2.5 million. All the loans require personal guaranties.
The hotel climate is “very encouraging,” Wright said.
“We’re very prudent at how much we’ll jump into construction. For this year, maybe $200 million, which would represent less than a dozen projects.”
That puts the company in prime position to provide bridge loans, he said.
“The rule of thumb we’ve seen is that CapEx is 10% to 15% of the overall capital stack,” Wright said.
Greenwich, Connecticut-based Access Point is a partnership formed by Stone Point Capital LLC and APF management. The company is planning to hire several new executives to handle the increased lending activity.
“That provides us with the amount of firepower for the next three years,” he said.