Greetings from Pete Whiskeman and Lyman Aldrich of Hotel
We are pleased to welcome you to Hotel
Finance Resource's brand new twice- monthly newsletter:
"Hotel Finance News."
In Hotel Finance News, we'll leverage our relationships with
over 60 lenders nationwide to bring you the latest information
on loan programs and joint venture opportunities currently available
in the marketplace. We will also bring you expert commentary on
the current issues that affect your hotel’s value.
It is our privilege to communicate with you, so we want to
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In this first issue, we’ll present “Today’s loan profile:” a
non-recourse loan for acquisition and renovation. And, we’ll
give you the latest information on the Gulf Coast lodging
industry courtesy of our friends at Smith Travel Research.
Thank you for being a part of the HFR
Pete & Lyman
Gulf Coast Lodging Industry - Revisited|
by Jan D.
Freitag, VP, Smith Travel Research
Almost a year has passed since Hurricane Katrina
hit the gulf coast. The performance of the lodging
industry in the gulf coast reflects the impact of the sharp
decrease in supply coupled with an influx of demand by
emergency workers and displaced residents. Table 1
shows the room revenue changes from the first six months
of 2005, prior to the hurricane vs. the first six months of
2006. While the state’s revenues increased only slightly, the
performance of markets and tracts varies widely. Take a look
below at the performance of hotels in the New Orleans market
through June of 2006.
The New Orleans hotel industry lost
almost 70% of its room inventory in September 2005, when
compared to June 2005. Of the 38,322 rooms, only 11,900
remained open for business. In June of 2006, the inventory of
28,400 rooms available is over double the inventory of nine
months ago but still 26% below last year’s
The combination of a drop in rooms available
and rooms sold lead to an increase in occupancy through
June. For the first six months of 2006 occupancy increased
2.2% to 71.2%. Rate increase was a robust 11% to
In the submarkets, we observed similar
trends. The Metairie/Airport tract lost 3,000 rooms but
demand YTD only decreased 3.3%, increasing occupancy by 24.5%
to 82.4%. Rates subsequently rose 45.5%, to
The East/Slidell tract saw its room
inventory diminished by 65%, down to 2,200 rooms. In June of
2006, 3,100 rooms were open, a number still 52% below last
June’s number. For those existing hotels occupancy increased
42.1% to 83.1% and YTD rate increased 59.2% to
In the hard hit Central Business District /
French Quarter tract we observed the largest decrease in
room count. Of the 24,700 existing rooms in June of 2005, only
5,600 rooms were still open for business in September. This
June some 19,500 hotel rooms are welcoming guests again, but
this number is still 21% below last year’s total. Demand
decreased as well and occupancy is down 10.1% to 66.1%. The
ADR increased through June by 4.2% to $146.09
Smith Travel will continue to monitor the performance of
the hotels in and around New Orleans and report on the
recovery of this important lodging market.
About STR: Smith Travel Research is the
recognized leader for US Lodging Industry benchmarking. For
over 20 years, STR has collected monthly and daily operating
data and reported on the state of the U.S. lodging industry,
maintaining one of the world's largest lodging industry
databases and publishing an array of valued industry research.
For more about STR and its services, visit the web site www.smithtravelresearch.com.
|Today’s Loan Program Profile: A non-recourse loan for
acquisition and renovation|
This particular loan program is for experienced
hoteliers that have a track record of renovating hotels and
increasing their values. It allows you to buy and renovate a
hotel or renovate a property that you already have in your
portfolio. The property has to be cash flowing at the time of
financing which means that there probably can’t be a “deep”
renovation. The idea is to use a non-recourse loan to get your
renovations completed, ramp up the value of your hotel, and
then refinance the property in the 3rd year for the long term
at lower rates.
- The loan for the hotel and the renovation is
- The loan is based on an appraisal of future value or a
debt service coverage ratio of future net operating income,
whichever is the lesser amount.
- For the hotels that over perform during this period,
there is a possibility of an “earn out” to increase your
Here’s an example of how the funds are advanced:
Let’s assume that you buy a hotel for $15 million and
that the lender finances 75% of the purchase price or
$11,250,000. The property improvement plan will cost
$3,000,000. The lender will fund the draws as you need the
funds for the renovation and at completion the loan will total
- The lender offering this program is a $180 billion
dollar asset management company with investments on 5
- This loan would be a floating rate mortgage with terms
of 24 to 36 months with possible extensions in some cases.
- The maximum loan size is the lesser of 75% to 80% of the
appraised value of the hotel at stabilization (usually 3
years in the future) or a debt service coverage ratio
between 1.05 and 1.20 based on a fixed rate constant.
- The minimum loan amount is $10 million.
Please contact Lyman Aldrich at 901-854-6366 or email at
Aldrich@hotelfinanceresource.com to discuss this and other
|About Hotel Finance Resource|
HFR has relationships with over 60 lenders
nationwide to bring you the best solutions to your hotel
In the past 7 years, we have
successfully completed over 2,200 hotel financing
transactions closing loans totalling over $550 Million
You can benefit from each of our
three senior partners’ 30 years experience in hotel,
real estate, equipment and general finance.
depth of experience and our relationships
Hotel Finance Resource a company you can
Please call Pete or Lyman today at
See Us at Intercontinental Hotels Group America's Investment
and Leadership Conference
On October 5th, Pete and Lyman will be in the
Hotel Finance Resource booth #1035 at the Metro
Toronto Convention Center, Toronto Cananda.