REPORT FROM THE U.S.—As the United States hotel sector continues to gather strength, lenders are feeling more confident about supplying capital to the industry. And as more financing flows, terms on that debt become clearer.
One example: DiamondRock Hospitality Company on 18 April said two of its subsidiaries closed on a limited recourse real-estate loan for US$100 million pursuant to an agreement with the Royal Bank of Scotland. The loan bears interest at an annual fixed rate of 5.46% and amortizes on a 25-year schedule.
Beginning today and recurring once per quarter, the Hotel Investment Barometer will survey lenders and finance experts to get their perspective on what terms they are seeing in the marketplace. Their responses can be found below.
Mathew Comfort, executive VP, Jones Lang LaSalle Americas
• Commercial mortgage-backed securities loans are seeing 60% to 70% loan-to-value with five-year terms of between 5.5% and 6.5%.
• Floating-rate capital is 50% to 60% LTV at rates of LIBOR plus 450 basis points to LIBOR plus 500 basis points.
• Terms for financing for assets in transition, non-recourse, are 6% to 9%.
Tino Korologos, managing director, Deloitte
• “We’re seeing leverage starting to creep up a little bit. I don’t know that we’re seeing 75% LTV on hotels, but we’re seeing it on other asset types.”
• “There is a lot of (mezzanine) debt available. It’s expensive.”
• There are a multitude of lending sources to the hotel sector, including commercial mortgage-backed securities lenders and mortgage real-estate investment trusts.
Joe Epstein, founder and president, First American Realty Associates
• Rates on three- to five-year, fixed-rate deals, with 50% to 65% LTV, are in the 5% range.
• Five-year terms on leverage of 65% to 75% see rates in the 6% range.
• On rates he sees in the marketplace today: “It’s like the old days.”
Steve Hanover, principal, Sequoia Capital Partners
• Shorter-duration loans are being frowned upon. Lenders are more apt to look at 10-year loan terms.
• Lender appetite for hospitality is back.
• “Rates are very attractive,” he said.