Boutique and lifestyle hotels have come of age in the eyes of an increasing number of lenders. Debt financing, in particular, has become more consistently available in recent months, said several panelists during a discussion of financing at this week’s Lifestyle/Boutique Hotel Development Conference. Lodging Hospitality and HVS Hotel Management sponsored the event, which was held at the Fontainebleau Hotel in Miami Beach.
“A thriving debt market has emerged in the past year for acquisitions and refinancings of well-established, cash-flowing properties, including boutique and lifestyle hotels,” said Tom McConnell, senior managing director of Cushman & Wakefield’s Hotel Transactions Group. As example, McConnell said in early 2009 his firm was asked to advise on the refinancing of two hotel properties. “We sent queries to 150 lenders. Two responded, and one of them dropped out,” he said. “By contrast, in the second quarter of this year, we queried 100-plus lenders for a refinancing and received 10 to 15 term sheets.”
He added that terms have also gotten more favorable: Interest rates today range between 5.7 to 6.5 percent versus eight to nine percent last year. Funding sources include life insurance companies, U.S. and foreign commercial banks and mortgage REITs.
Angelo Stambules, who recently joined Marriott as senior vice president of mortgage banking, said for certain projects—particularly conversions of independent properties—the brand company will provide financing to bridge the gap between the first mortgage and the equity in a deal.
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