Hotel Resource Guide III

As we pass the first month of a historical moment, an international lockdown with no uncertain end, many property owners are having increasing concerns regarding their debt servicing capabilities. Thus, we have compiled various resources as well as a general overview of the lending market, to aid your decision-making.

Due to the threat of delayed or defaulted payments, capital markets are becoming stricter. In the Mortgage Credit Availability Index published by Mortgage Bankers Association, the MCAI fell by 16.1% to 152.1 in March, indicating that lending standards are tightening. [1] Thus, despite the barrage of articles online urging you to refinance, this option might be more difficult during this time. The LTV and LTC ratio that lenders feel comfortable with has decreased from a maximum of 70% to 55%. Additionally, lenders are examining borrower experience more thoroughly. Borrower’s now need to demonstrate how they are “effectively managing their current assets” during the pandemic. They must present their cost control and loss prevention incentives. Debt Service Coverage Ratios are now expected to be 1.40-1.50x in contrast to the 1.25-1.30x which was the standard pre-pandemic. [2]

CMBS lenders are facing obstacles in underwriting future trailing 12-month cash flow statements as every week of this situation bears new uncertainty. As a result, fewer CMBS investors are willing to accept hotel mortgages due to the additional risk. As this risk is passed-through to primary lenders, refinancing may lead to higher interest rates payable.

On an uplifting note, we are seeing more financial institutions seeking to capitalize on the various opportunities which this economic situation has presented. J.P Morgan and Blackstone Group just to name a few, are raising significant capital to provide in the current market. [3] We may see stronger refinancing opportunities soon. [4]

• Lenders may defer payments up to 6 consecutive months for mortgages not sold on the secondary market

• The deferred amount should not exceed the lesser of 6 monthly mortgage payments or 20% of the original loan amount.

• Payments may be deferred up to 6 months if they will not extend the maximum 6-year maturity period. [5]

• Up to $2 million to provide for expenses such as fixed debt and payroll costs
• Interest rate: 3.25%
• Loan term up to 30 years
• Includes automatic 1-year deferral on repayment, due to current circumstances
• Available to any small business with less than 500 employees including private non-profit organizations and 501(c)(19) veterans’ organizations
• Applicants must demonstrate temporary loss of revenue, among other criteria
• Economic Injury Disaster Loan Advance
• An advance of up to $10,000 which does not have be repaid (effectively a grant) [6]