by Rushi Shah
You’ve done everything right. You have a cash-flowing hotel in a high-demand market, good operating history, a desirable flag and quality sponsor. You’re on top of property improvements, RevPAR is on point and you began your search for financing well before your mortgage matures. Somehow, you still haven’t found the right financing. What could you be missing?
You may be holding back. We’ve secured financing for all commercial property types for clients seeking loans from under $5 million to over $100 million, and we often encounter property owners with great properties who don’t understand why lenders need the documentation they ask for, so they drag their feet.
The sooner you produce the required documentation, the sooner we can get an accurate assessment of your deal and get you a term sheet. This is also the time to raise any known issues as there is still time to fix them. “Hair” on a deal doesn’t mean a deal can’t get done and can often be mitigated by using the property’s strengths in one area to override the weakness in another. Last minute surprises, however, can kill it.
Everyone has been there, seen that. You’d think getting your deal in front of as many lenders as possible is a great idea, giving you the best shot at competitive pricing. If they get wind of how many others are looking at your deal, however, some may decide your deal is “over-shopped” and pass. Start your search by finding an advocate with a proven track record and solid capital connections. Your advocate will help you package your deal to its best advantage and get it in front of the optimal capital source.
You assume CMBS and other institutional loans are too complicated. Not all non-recourse loans are made equal. Properties in good markets with lower leverage with better sponsorship can receive better reception from lenders. The closing process can be streamlined if your intermediary has worked with the lender before, or if they have access to technology that automates the transaction.
You trusted the wrong person. We’ve encountered this one too many times: a perfectly good deal being shopped by an inexperienced or even untrustworthy broker who over promises and never delivers. If you’re going to hire an intermediary, check track record and references. A deal’s success is often determined by who you (or your advocate) knows, so be sure you have someone with experience and strong relationships on your side.
You’re blinded by past experience. You got a bank loan before, and you’re only approaching banks now. Consider alternative non-recourse capital sources like CMBS, credit unions or life companies, which may offer longer terms, higher LTVs, more flexibility taking cash out and don’t require personal guarantees. These forward-looking financing solutions can insulate you from economic risk and ensure you are well-positioned for the future. ■
Rushi Shah is an executive vice president at commercial mortgage banking firm Aries Capital, LLC, and president of its online non-recourse platform LendingCap Commercial. Since 1991, Aries has arranged/funded over $5 billion in financing in the U.S. and Caribbean. Shah held previous positions at Northern Trust. A member of AAHOA’s Strategic Business Advisory Committee, Shah holds an MBA from The University of Chicago’s Booth School of Business.
Have a question for our expert? Write to our editor at firstname.lastname@example.org.