In November, we explained how to pre-qualify a hotel for a CMBS conduit loan. We have received many positive comments on how useful our process is. Now? We are adding an additional test to the process. The test involves a limit to the maximum loan amount for certain franchises.
Step 1: Is the hotel either (a) interior corridor located anywhere or (b) exterior corridor in a resort/beach-only location? If the answer is YES, then proceed to Step 2. If the answer is NO, then the hotel does not qualify for a CMBS conduit loan.
Step 2: Is the hotel “mid-scale” or higher (i.e., NOT economy) based on the attached list of hotel chains from Smith Travel Research? If the answer is YES, then proceed to Step 3. If the answer is NO, then the hotel does not qualify for a CMBS conduit loan. If the hotel is listed as “mid-scale,” the maximum loan amount will be approximately 2.5 times room revenue.
Step 3: Does the hotel have 60% or more combined “Excellent” and “Very Good” reviews on TripAdvisor? If the answer is YES, then proceed to Step 4. If the answer is NO, then the hotel does not qualify for a CMBS conduit loan.
Step 4: Request the most recent monthly STAR report from the hotel owner. Go to the “Glance” tab 2. On row 4, “Running 12 Months,” scroll right to the RevPAR section and look at the Running 12 Months index (RGI). It should be 80 or more. If the number is below 80, then the hotel does not qualify for a CMBS conduit loan.
For a little more clarity, the RGI index is often referred to the “penetration rate.” It measures whether the property is getting its fair share of the market. A 100 means that the property is attaining exactly its fair share, below 100 means the property is attaining less than its fair share (a bad thing) and a reading above 100% means the property is attaining more than its fair share (a good thing).
By following the above steps owners and mortgage brokers can deliver qualifying hotel CMBS conduit loans to us at ValueXpress. Please remember, though, that these steps are guidelines. If you believe the property you are examining has mitigating circumstances, share them with us at ValueXpress by contacting Mike Sneden at firstname.lastname@example.org, Dennis Suh at email@example.com, or Gary Unkel at firstname.lastname@example.org.