I am having a difficulty to find a lender willing to finance a commercial loan to my client. My borrower is looking for $7 million loan less than 7% to purchase the hotel, which he is now leasehold operating (2 years). He like the loan 1st 24 months interest only and 25 year fix later. The purchasing price is $10 million.

The problem to get the loan is his declined positive NOI during passed 2 year operations because the hotel restraunt operated by diff. owner had been closed for 9 months and the bay area economics had gone to down side.

However, his room occupancy is 75%-76%. Currently, some other investers has just invested $1 billion to the area.

Do you have some possible suggested lenders for me?

Email: llpan00@yahoo.com

Ling:

There are lenders out there that do Hotel loans. In fact, once I had to help with a project that involved reviewing a large portion of a bank’s Commercial Real Estate portfolio and was surprised at the number of Hotel/Motels this institution had in its books. Nothing as big as $7 Million, but several on the $3MM to $5MM range.

The problem here is that you have declining operating income, and as you probably know you need to get repaid with cash flow. You also want two items in the structure that are not common for commercial properties.

First, amortization does not start until two years after closing.
Second, You want a fixed rate for 27 years and under 7%

You mention occupancy rate of 75%, what is the Average Daily Rate? How many rooms in the area? How many more are coming online?

I am not saying the loan could not happen. A lender might want to tweak the terms and structure, but you will have to sell them on the deal and the borrower. I don’t recommend lenders other than pointing people to look in their own backyards. For a deal this size, you are limited to lenders with a billion dollars in assets and up. That is not the way a legal lending limit is calculated, but it should give you an idea of who to approach. In any major metropolitan area you will have at least six banks that can take a look at this. Assuming you are in the USA.

Good luck

First, Fixed for 25 years under 7% is not happening. Second, the financial will def be a neg sticking point. Unless your client is open to ownership interest from an institution in the same industry, Hard money may be the most doable option for him.