Something keeps coming up in our conversations with hotel owners right now. The market feels different than it did a year ago, but it is hard to know exactly what to make of it.
Here is what we are seeing from where we sit.
The market is open, but it is not easy.
Cash flow is the new dividing line. Permanent lenders underwrite to in-place performance, not future potential, and that determines whether you are looking at competitive terms or a premium-priced bridge. Bridge lenders will still get the deal done, but they want a real story. The market is improving is not enough. Show them how you plan to change the outcome.
Sponsors are prioritizing flexibility, not just proceeds.
In several recent executions, the real value we delivered was optionality. CMBS has become a five-year product, which is a real improvement for owners managing PIP cycles. In Wyomissing, that meant a five-year fixed-rate loan with no prepay for the full term. In Philadelphia, it meant a cleaner stack with flexibility around the next capital event. The common thread: giving the sponsor room to make the next decision well.
Banks are back, and relationships matter more than ever.
The closer your relationship with a bank, the better your terms. To a point. Once you approach a bank’s lending limit, every new deal gets harder. We help owners cultivate multiple bank relationships so they always have options. With debt capital abundant and equity in short supply, casting a wide net is how you secure the best execution.
Hospitality is an operating business again, not an asset trading business.
Returns are shifting back toward cash-on-cash yields. Owners who expected automatic appreciation by buying a hotel right are recalibrating. Operators focused on running great hotels are finding more success than asset aggregators. That changes how lenders evaluate sponsors, and how owners should be thinking about their capital structure going forward.
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