Debt

Direct Lending Programs

Bridge Financing

Hotel Capital originates short to medium term capital for hotel acquisitions and recapitalizations of existing assets. Ideal for transitional, non-stabilized assets with a value-add component or situations where a quick closing with surety of execution is needed. Bridge loans typically include, but are not limited to, opportunistic investment transactions for mispriced assets with substantial upside through turnaround situations, discounted payoff and discounted note acquisitions.


Note Financing

Hotel Capital originates first mortgage capital for hotel owners or investors to maximize returns through the acquisition of distressed debt secured by hospitality assets. Hotel Capital has directly purchased dozens of discounted notes for its own balance, and on behalf of its client and investors. In the process, HC has become an expert in properly assessing the risk and possible outcomes, as well as the hidden legal and financial complexities of distressed debt transactions. Hotel Capital’s surety of execution and experience can help a sponsor looking to acquire a distressed note to get to the asset in the most expedient manner, or to work out the loan to maximize the investment return.

Mezzanine Debt Financing

Hotel Capital originates mezzanine debt to give a sponsor greater proceeds and go higher on the capital stack (LTV) than what senior conventional debt would allow. Mezzanine loans are typically secured by second liens on real estate or by partnership and limited liability company interests. They are ideal for opportunistic purchases to minimize the direct common equity required, recapitalizations, financing PIPs and refinances where the principal amount currently owed is higher than what senior debt loan commitments can be obtained.


Discounted Payoff (DPO) Financing

Hotel Capital originates short to medium term first mortgage capital to sponsors repurchasing their existing debt at a discount to “right size” the amount of debt on the asset.

Correspondent Lending Programs

Conduit Loans

Hotel Capital has quality correspondent relationships with several Wall Street investment banks to fund branded hotel assets in major markets (top 50 MSAs) to be securitized in CMBS debt pools. Minimum $7 million loan size. Major underwriting considerations are leverage (LTV), debt yield, DCR, market, brand, & STR report performance. We put together a professional loan package and exclusively represent your transaction in the capital markets to leverage lender quotes, stimulate competition, and negotiate to obtain the best terms available for your transaction.


Conventional

Insurance companies, community, regional and national banks. Minimum loan size $5 million. Heavy emphasis placed on the quality of sponsorship, recourse, credit and global cash flow.

SBA / USDA

The parameters of these government guaranteed programs are constantly changing. When is it best to do an SBA 504 loan vs a 7A loan? What about USDA? What is the difference? What are the advantages? Why would a bank turn down my loan application and then fund the same deal it just turned down after receiving a package from Hotel Capital (actually a true story). We have the years of expertise to put together a quality loan package, properly structure your deal, and get your hotel purchase or refinance funded. Knowing the list of active hotel lenders is just part of the battle. Presenting your loan package in a professional manner to get it funded is what separates the successful financiers. Since we are a direct bridge lender, and have an expertise in hospitality, we know what lenders are looking for, and more importantly, how they underwrite. Leverage our expertise to get your loan approved.

First Mortgage Bridge Loan Program Requirements

  • Eligible Collateral: Typically branded, interior corridor, limited, select, and full service hotels with between 75 and 300 keys, and note purchases secured by same.
  • Eligible Locations: Continental U.S.
  • Purpose: Purchase, refinance, discounted payoff, recapitalization, construction completion, note purchase, etc.
  • Transaction Sizes: $1 million to $20 million, higher on a case by case basis.
  • LTV: Up to 70% of "as-is" appraised value or actual purchase price.
  • Security: First mortgage lien on the subject property(s), assignment of all permits and approvals, assignment of leases, UCC filing, or assignment and security interest in same on note purchases.
  • Ownership: Single asset, special purpose entity.
  • Commitment Deposit: 1% of loan amount (minimum $15,000) payable upon acceptance of Loan Commitment for full underwriting, due diligence, site inspection, 3rd party reports, legal, title work, document preparation, comfort letter, and closing costs.
  • Prepayment: 6 month interest guarantee.
  • Interest Rate: Rates starting at 9.9% interest only.
  • DSC / Debt Service: <1 based on interest only acceptable with quality pro-forma & turnaround plan
  • Recourse: Full personal guaranty of sponsors. Non-recourse available with compensating factors.
  • Loan Term: 1–5 yrs
  • Reserves: Real estate taxes, hazard insurance, replacement reserves, and mortgage interest may be required.
  • Underwriting Considerations: Heavy emphasis on new equity capital to be funded in connection with loan or additional collateral, concentration on value creation, market analysis, sponsorship, and exit strategy.
  • Third Party Reports: MAI Appraisal, Phase I environmental, feasibility and others if required or ordered by Lender at expense of Borrower.
  • Closing Time: 2 to 3 weeks from receipt of full package, application acceptance and deposit remittance.

Preferred Equity

Hotel Capital partners with owners by injecting capital into hotel real estate and taking a passive preferred equity ownership stake.

Preferred Equity Program Requirements

  • Eligible Collateral: Typically branded, interior corridor, limited, select, and full service hotels between 75 and 300 keys, and note purchases secured by same.
  • Eligible Locations: Continental U.S.
  • Purpose: Purchase, refinance, discounted payoff, recapitalization, construction completion, note purchase, etc.
  • Transaction Sizes: Typically $1,000,000 to $10 million, higher on a case by case basis
  • Ownership: Single asset, special purpose entity.
  • Preferred Equity Return: Typically a current pay rate + a percentage of ownership and associated cash flow that varies according to project plan & available cash flow.
  • Minimum Levered IRR target: Varies per transaction.
  • Minimum NOI %: Depends on market/property type/brand/etc.
  • Commitment Deposit: 1% of preferred equity amount (minimum $20,000) payable upon acceptance of Preferred Equity Term Sheet for site inspection, 3rd party costs, legal and closing costs. Any remainder credited at closing, or refunded in the event the deal is not approved.
  • Buy/Sell Agreement: To be defined in the operating agreement
  • Preferred Term: 3–5 yrs
  • Reserves: Real estate taxes, hazard insurance, replacement reserves, and mortgage interest may be required.
  • Underwriting Considerations: Heavy emphasis on value creation, market analysis, sponsorship, and exit strategy.
  • Third Party Reports: MAI Appraisal, Phase I environmental, feasibility and others if required at expense of Sponsor.
  • Sponsor Promote: Occurs after specified IRR hurdles are met and tiered based on the success of the investment.
  • Closing Time: As early as 30 days from receipt of full package, application acceptance and deposit remittance.

Equity

Overview

Hotel Capital makes direct equity investments into hotel real estate by acquiring properties with joint venture partners and passive investors.