ValueXpress has now completed over 200 CMBS conduit loans for hotels. We have financed every hotel brand in the United States! The most popular brands for refinance for us are Holiday Inn Express and Hampton Inn. Many of our hotel clients use the “cash-out” feature of CMBS conduit loans to finance Property Improvement Plans (PIPs) such as the Formula Blue program for Holiday Inn Express and the Forever Young initiative for Hampton Inn.
Having completed so many hotel transactions, we can advise our clients on all the items that can slow down the closing of their hotel financing, and we can get to work on them immediately once the Loan Term Sheet is executed. A common issue we run into is franchise “alignment.” Often hotel owners purchase land zoned for a hotel and then approach a franchisor such as IHG, which owns the Holiday Inn, Holiday Inn Express, Staybridge and other brands, for a franchise license. They will pay an up-front fee for the license and enter into a franchise agreement, perhaps executing the agreement in their personal name.
The proud owner of the franchise license now gathers his partners, builds the hotel and forms a legal entity, such as an LLC, to own the property. The partners own the LLC, but the proud owner never thinks to go back to the franchise and change the franchise agreement that is in his personal name to the entity name and add the partners to the franchise agreement. Therefore, the franchise agreement is “not aligned” with the ownership of the hotel and a CMBS conduit loan cannot be closed until the franchise agreement is “aligned” with the ownership of the hotel. This is a time-consuming process, so the moral of the story is to get your hotel ownership aligned before beginning the CMBS conduit loan process.