Today's Hotelier - February 2018 - 27

FINANCE

 3-MINUTE READING TIME

TAW4/SHUTTERSTOCK.COM

HOTEL
FINANCING

Q&A

Answering frequently asked questions about large loan amounts.
by RUSHI SHAH

ARE THERE ECONOMIC
ADVANTAGES IF MY
LOAN AMOUNT IS OVER
$20 MILLION?
Yes. First of all, whether you are refinancing $5 million or $50 million, the
amount of effort the lender has to go
through is the same. Because time is
money, lenders will prioritize larger
deals where their return on time is
greater. As a result, larger-sized deals
will be in demand by more capital
sources, resulting in more and better
options for borrowers.
Second, with a larger loan amount,
it takes less dollars for the lender to
make an absolute profit. As a result,
the lender can reach its target return
at much narrower spread. For the borrower, this typically means lower rates
and more room for your intermediary
to negotiate terms.
Third, borrowers with larger loan
amounts also tend to be more sophisticated with industry standard financial
statements. This streamlines the process for both the borrower and lender
and ensures the transaction moves
forward without stalling. Deals that go

sideways are troublesome for both the
borrower and the lender. If the delay
extends, third-party reports may go stale
and need to be re-ordered at additional
cost, or market changes may hurt cash
flow and cause the loan terms to be
recalibrated.
Finally, larger loan amounts open
up creative financing solutions such
as ground leases, where instead of
financing your assets as fee-simple
properties, you split ownership of the
land and the hotels on top into leasedfee and leasehold entities, enter into a
99-year lease with the hotels as tenants and refinance the land separately.
Because the operating business carries
higher risk, when divided the land can
be financed at a higher loan-to-value,
better rates and terms, and often with

tax benefits (consult your tax advisor).
Larger loan amounts may also attract
foreign capital, giving borrowers additional choices.

DOES IT MATTER IF MY
LOAN AMOUNT IS FOR
A SINGLE PROPERTY OR
HOTEL PORTFOLIO?
Cross-collateralizing multiple hotels and
financing as a portfolio is a smart way
to get to a larger loan amount. You will
reap many of the same benefits as above,
plus enjoy better pricing on third-party
reports and legal costs than if you had
financed each property in a separate
transaction. At times, this tactic can also
help borrowers finance the portfolio's
weaker quality assets, because they are
crossed with stronger properties.
■

Rushi Shah is principal and CEO of the commercial mortgage and real
estate investment banking firm and AAHOA Club Blue Founding Member,
Aries Conlon Capital. As a leader in hospitality financing, Shah specializes in
structuring and placing high-leverage, non-recourse bridge and permanent
debt with cash out for full- and limited-service hotels nationwide. Since joining
the firm's predecessor Aries Capital in 2015, Shah has structured and closed
hundreds of millions in financing for all property types. Shah has held previous positions at
Northern Trust and has an MBA from The University of Chicago's Booth School of Business.
TODAYSHOTELIER.COM | FEBRUARY 2018 | 27


http://www.TODAYSHOTELIER.COM

Table of Contents for the Digital Edition of Today's Hotelier - February 2018

Letter From the Chairman
Letter From the President & CEO
Government Affairs
CEO View
The Great Extended-Stay Boom
12 Easy Pieces for a Hotel Renovation
Key Money Incentives: To Take or Pass?
How ADA Compliance Laws Affect Your Hotel Website
When Small Businesses Prosper, America Prospers
Hotel Financing Q&A
AAHOA @ Industry Events
Aahoa Founding Members
Aahoa Vendor Partners
Classifieds
Advertiser Index
Today's Hotelier - February 2018 - Intro
Today's Hotelier - February 2018 - cover1
Today's Hotelier - February 2018 - cover2
Today's Hotelier - February 2018 - 3
Today's Hotelier - February 2018 - 4
Today's Hotelier - February 2018 - 5
Today's Hotelier - February 2018 - 6
Today's Hotelier - February 2018 - 7
Today's Hotelier - February 2018 - Letter From the Chairman
Today's Hotelier - February 2018 - 9
Today's Hotelier - February 2018 - Letter From the President & CEO
Today's Hotelier - February 2018 - 11
Today's Hotelier - February 2018 - Government Affairs
Today's Hotelier - February 2018 - CEO View
Today's Hotelier - February 2018 - The Great Extended-Stay Boom
Today's Hotelier - February 2018 - 15
Today's Hotelier - February 2018 - 16
Today's Hotelier - February 2018 - 17
Today's Hotelier - February 2018 - 12 Easy Pieces for a Hotel Renovation
Today's Hotelier - February 2018 - 19
Today's Hotelier - February 2018 - 20
Today's Hotelier - February 2018 - 21
Today's Hotelier - February 2018 - Key Money Incentives: To Take or Pass?
Today's Hotelier - February 2018 - 23
Today's Hotelier - February 2018 - How ADA Compliance Laws Affect Your Hotel Website
Today's Hotelier - February 2018 - 25
Today's Hotelier - February 2018 - When Small Businesses Prosper, America Prospers
Today's Hotelier - February 2018 - Hotel Financing Q&A
Today's Hotelier - February 2018 - AAHOA @ Industry Events
Today's Hotelier - February 2018 - 29
Today's Hotelier - February 2018 - Aahoa Founding Members
Today's Hotelier - February 2018 - 31
Today's Hotelier - February 2018 - Aahoa Vendor Partners
Today's Hotelier - February 2018 - 33
Today's Hotelier - February 2018 - 34
Today's Hotelier - February 2018 - 35
Today's Hotelier - February 2018 - 36
Today's Hotelier - February 2018 - 37
Today's Hotelier - February 2018 - 38
Today's Hotelier - February 2018 - 39
Today's Hotelier - February 2018 - Classifieds
Today's Hotelier - February 2018 - 41
Today's Hotelier - February 2018 - 42
Today's Hotelier - February 2018 - 43
Today's Hotelier - February 2018 - 44
Today's Hotelier - February 2018 - 45
Today's Hotelier - February 2018 - Advertiser Index
Today's Hotelier - February 2018 - cover3
Today's Hotelier - February 2018 - cover4
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