May Hospitality Capital Markets Updates

Hoteliers will see a stable lending environment this year.  Non-bank lenders, Conduits, and Banks are all hungry to deploy capital. Experience, track record and the overall strength of the market are the top determining factors for loan options available.  Most lenders will be aggressive with pricing and leverage in order to win deals. 

Lenders will max out at 75% loan-to-cost and 70% loan-to-stabilized value for senior bridge loans.  Bridge loan pricing will be in the 6.50% to 10% range.  More sponsors are seeking mezz and preferred equity in order to push leverage to as high as 95%.  Borrowers will see fixed rates on stabilized assets start around 4.75%and floating rates start at L+250.   Lenders will want to see at least a10.50% debt yield on stabilized assets and count on this to push to 11% by year’s end. 

Construction loans are becoming harder to obtain from banks. Non-bank lenders will be the most active in hotel construction lending this year.  Non-bank lenders will push LTC to 80% on stretch senior loans but with much higher rates and fees compared to banks.

Banks will want at least 30-35% equity for new construction and acquisitions, require recourse and only seek experienced and well-capitalized borrowers with projects in local markets that they can do repeat business with. Depository relationships usually required.

Select life companies will fund full-service hotel loans in markets with a population of at least 300,00.