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.

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

Program Requirements

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.