Commercial Financing and Underwriting Commercial Loans on Hotels

Commercial mortgage lenders are hungry for commercial loans on flagged hotels these days.  Occupancy levels are historically very high right now because most new hotel construction ended on September 11th.

Typically commercial banks today will lend up to 60% of cost to build a new major-flagged hotel.  Commercial developers will usually contribute 15% of the total cost and obtain a mezzanine loan for the balance.

Commercial banks will make permanent commercial loans on standing flagged hotels up to 65% to 70% of appraised value.

When underwriting a loan on a flagged hotel or even older, unflagged motel, here is a great rule of thumb:

Hospitality properties typically sell for around three times their gross annual rents.  A motel bringing in $1 million a year in revenue will sell for around $3 million.  If it is a gorgeous, newer hotel, it might sell for 3.5 times it gross annual income.

A disproportionate number of folks from India are in the hospitality business, and a great many of them have the last name of Patel.  These folks are usually not related to each other.  The word "Patel" simply refers to the state in India where they, or their parents, once lived.  Many times  their first names are very, very long.   Using this custom, I might be called Georgeblackburne California.

You can find hundreds of hotel lenders and motel lenders on C-Loans.com.