By Rushi Shah
Choose the right intermediary to secure better hotel financing.
Whether you are new to non-recourse loans, or a veteran borrower, the road to closing your hotel refinance or acquisition loan may seem onerous. Take a wrong turn, and it can cost you time and money to change lanes or get back on course. Enlisting the expertise of a qualified financing intermediary to lead you through the process, however, can streamline your journey, improve your ultimate terms and keep you on track for success. Look for intermediaries who do the following:
Offer a record with recency
If you or a loved one were having heart surgery, would you want a doctor who was performing his first procedure, or a surgeon who hadn’t operated for several years? Of course not. This same standard applies to choosing whom to trust with your hotel financing. Look for an intermediary who has a history of successful closings and is actively closing loans in today’s ever-changing market. Anyone can promise that their firm is the most experienced, has the strongest capital source relationships, or can get you the best rates and terms. Choose a partner with a track record that proves it.
Show effort and commitment
Intermediaries typically receive 1 percent of the loan amount at closing as a fee for their services. Less reputable brokers will take on every deal no matter the odds of it actually closing, throw it up over the wall and hope someone picks it up. This lack of commitment is an immediate red flag and a good indicator of the odds that your loan will close or that you will get the proceeds, rate or terms you expect. Instead, your intermediary should address concerns with you upfront to avoid wasting your time and money. Once the decision is made to move forward – and even knowing that he or she won’t be compensated if the loan doesn’t close – a quality intermediary will invest considerable time and effort to underwrite and package your deal. They’ll ensure your property is accurately represented and optimally presented to the right lenders, expertly mitigate any obstacles that arise, negotiate on your behalf and maintain control of the transaction from start to finish.
Pursue quality, not quantity
A common borrower misconception is that the more lenders your loan is showed to, the more competition for your loan and the better the financing you can secure. Often the exact opposite is true. Because of the amount of work necessary to process a transaction, lenders want deals that have a high likelihood of closing with their institution. If a broker or intermediary over-shops a loan, some lenders won’t even bother to look at it. To ensure you aren’t shut out of viable options, choose an intermediary who leverages his or her experience, market knowledge and relationships to strategically select a roster of targeted capital sources that are willing and able to deliver what you need.
Everyone on all sides of the transaction table shares the same goal – to close the loan. While the destination is clear, how you get there and what your financing looks like at the end can vary widely. There is a saying in the industry that every deal has its story. Lenders may set thresholds for approval, but often a property’s weaknesses in one area can be overcome by its strengths in another. An intermediary’s ability to think outside of the box – and push or pull levers to create equilibrium between what the lender is willing to offer and what the borrow needs – will impact how well you and your property are positioned for ongoing growth and success. ■
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 Founding & Allied Member Committee, Shah holds an MBA from The University of Chicago’s Booth School of Business.