A prospective client approached me at a recent
industry conference asking about market rates. He
had 8 limited service hotels at the time (he now has
10) located in one state under various brand names.
The client had just completed one hotel and
was in
the process of building another. He wanted to talk
about a loan to pay off his local bank where all of his
properties were financed.
I explained my
belief that each company should have a local lender
but not to the exclusion of other lenders that can, in
many cases, provide loans and services that the local
lender cannot.
I advised him that the lowest rates available at
the time were conduit loans for properties with at least
12 months of operations. The client was skeptical
coming from a small state that doesn’t get much
attention from national sources, but I had a good
feeling and persuaded him to go forward to find out
what the market might offer.
Note on using a smaller bank
exclusively:- Whenever the economy
begins to
decline, many small
banks quickly get out of the hotel financing market
sometimes leaving the client with no way to finance
expansion if the opportunity presents itself.
- Smaller banks often have limits on how much they
can finance in hotels for one customer.
I performed all of the due diligence and data collection
on his newest properties and the remaining 6 hotels.
He was in good shape with well-run, profitable
properties and low loan-to-cost ratios.
HFR
takes a consultant’s approach to meet our
client’s needs, so I researched several lenders that I
thought would be most appropriate for the client. In
doing so, I am
looking for several different ways to provide the
financing. If successful, then one or more of these
can be used.
Next, I
narrowed our lender selection
down to the 4 lenders with the best options, presented
the client data to the 4 lenders and got 6 different
proposals back.
The Result?
- The client could, indeed, use a national or
regional bank (vs. being tied solely to a local bank) to
finance the construction of his properties. This gave
the client an alternative to his “one bank”
approach.
- I was able to find financing sources to
finance the client’s just completed hotel
- I delivered 2 fixed-rate proposals and 2
floating proposals on the just completed hotel at
rates
in the low 7's
- And, I was able to find sources that could
finance the portfolio of seasoned properties
- I found a sizeable bank to look at financing
several of his other properties and as well as the
construction of his next properties.
- I found a large conduit financing source
that was interested in financing several of his existing
properties at rates under 6%.
And, each of these sources delivered interest
rates
that were from 1 to 2% lower than the local bank
(the
one incidentally that had all of the clients loan and
deposit business).
The local bank may have
been
offering all that it could, or may have been taking
advantage of the client because he didn’t know what
was available in the market or how to go about finding
other opportunities.
Needless to say, this
experience was a real eye-opener for the client.
What HFR
does is provide you with several solutions
for you to accomplish your goals. We use our existing
resources and experience in the market to do all the
research for you. We only get paid out of the closings.
Now what would interest savings of 1-2% mean to
you?
Ask us how we can help!
Call me at (901) 854-6366 or email
aldrich@hotelfinanceresource.com.
