With the exception of construction financing, there is plenty of money available to borrow for hotel deals at the moment, according to a group of lenders, and competition is keeping the cost of borrowing down even as the Federal Reserve increases interest rates.
Speaking during the “Active lending on midmarket hotels” panel at the recent Hunter Hotel Conference, lenders said many in their position are eager to ink deals as a huge amount of capital sits ready to be deployed.
“Lenders are starting to capitulate on things to get deals done,” said David Turley, principal at Cronheim Hotel Capital.
Peter Berk, president of PMZ Realty Capital, said it’s important to remember that lenders aren’t just gatekeepers. They’re also people who need to put money out to justify their existence, he said.
“Lenders are looking to say ‘yes,’ not to say ‘no,’” he said. “As long as (a borrower’s) credit works and (the project’s) story makes sense, there should be a lender out there for it.”
Panelists noted there are some things people should keep in mind to avoid tripping up deals, including the fact that they should be as honest and transparent with their lenders as possible.
“Transparency is big,” said Brad Heritage, SVP of business development and marketing for Northeast Bank. “It blows my mind what (borrowers) think we won’t discover through the due diligence process. That’s a big piece of the puzzle. We want to know the story, and that means all of the story. The sooner we know (about potential problems), the more creative and productive the dialogue and back-and-forth will be.”
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