From chopping onions to managing and training housekeepers, Countrywide Commercial Real Estate Finance Managing Director Warren de Haan, 34, intimately knows how to size-up hotel properties and borrowers. The South African native should. He earned a hotel diploma from the Hotel Institute Montreux, Switzerland and has worked in hotels in London, Zurich and Geneva.
After getting operations experience under his belt, de Haan attended Cornell, where he learned the finance side of the business. Now, de Haan is using that combined knowledge to grow Countrywide's hotel volume like bamboo. This year, he projects that hotel loans will make up $1 billion to $1.5 billion of the company's estimated $7 billion in commercial loans. Next year, that figure is expected to rise to $2 billion. NREI recently spoke to de Haan about Countrywide's strategy in the burgeoning hotel sector.
NREI: How has your finance and operations experience benefited you as a lender?
de Haan: I got the opportunity to go to Cornell, which was a perfect complement to my Swiss training, where I didn't focus on operations at all. What I focused on was real estate and finance classes. I understood what it was like to clean the toilets and how to manage people within the hotels. I also understood what the ownership side looks at, what they do, how they finance themselves and how they raise money.
NREI: In which hotel niche do you see Countrywide's lending growth in the future?
de Haan: We certainly like primary markets, growth markets and great flags. But we are definitely doing a lot of well-branded limited-service properties in secondary or tertiary markets that have a good story and a good operator. With an operator that we know and like, and who has a good brand and the ability to operate very efficiently in a secondary or tertiary market — we will go into those markets pretty heavily, too.
NREI: There's been a lot of volatility in the 10-year Treasury rate. What impact has that had on your business?
de Haan: The only negative impact that it's had on our business is on acquisitions where the borrowers have actually fallen out of contract because rates have run up on them and their numbers don't pencil out anymore. So from an acquisitions perspective, there's some risk that the transactions don't close. On the flip side, the volatility has resulted in a tremendous flow of refinancing. We compete heavily on early rate locks. We commit really quickly.
NREI: How has loan volume in hospitality changed over the past year and how has the risk changed?
de Haan: Hotel volume is definitely up across the board and we've seen a staggering amount of inquiry. What we've seen from a risk perspective is that lenders are perceiving risks in hotels to be relatively low compared to their historical risk profile. What that has translated into is cheaper money and higher leverage in the circumstances that have warranted it. There's a lot of capital available at the mezzanine level, and there's also a lot of capital available at the first mortgage level.
NREI: What's your outlook for hotel lending volume in the short term and long term?
de Haan: Close to 20% of our production is in hotels. It's going to continue to grow as our total production is growing, but as a part of that, it will always be close to 20%.