6.22.12: Characteristics of Hotel Loans in CMBS 2.0

Jim Brett, senior loan underwriter, head closer, CMBS research analyst at ValueXpress and all-around good guy, recently prepared a study of the 222 hospitality loans that have been included in 35 CMBS issues since 2010.  The effort discovered trends that can be utilized to advise our hospitality borrowers on expected deal structure, underwriting parameters and rates for a CMBS conduit loan.

Here are some of the basics:

 

Low

High

Avg

Loan Size (millions)

$3.2

$145

$15.9

DSCR

1.36x

4.13x

1.80x

LTV

21.8%

74.9%

57.4%

Some caveats to the data:  Only two loans report DSCR < 1.40x and 12 < 1.45x.  In regard to LTV, only 10 loans of the 222 reported LTV > 70%, and 26 reported LTV between 65%-70%.  The data support market quotes for hotels requiring a minimum DSCR of 1.45x and LTV < 65%, but suggest that LTV of 65%-70% with a 1.45x DSCR might be possible.

Rate dispersion:

Up to 4.99%         17

5.00 – 5.49%         42

5.50 – 5.99%          74

6.00 – 6.49%         68

6.50 – 6.99%          18

7.00 – 7.49%            2

8.00 – 8.49%           1

It is difficult to obtain specific takeaways on rate, except to say that rate is really based on market timing.  The largest loan, at $145 million and secured by the Intercontinental Hotel in Chicago, IL, received a rate of 5.61% based on 1.57x DSCR and 50.2% LTV.  Clearly, many other hotels did better than this, including a $7.7-million Candlewood Suites in Killen, TX with a rate of 5.05%.

Many limited- and full-service franchise brands in the “mid-scale” and better franchise scale (as defined by Smith Travel Research) are represented.  No “economy” brands are represented.  Better independent hotels can be found in CMBS as well, represented by approximately 15 hotels.  Another theme is most hotels are located in primary or secondary markets.  Hotels in smaller markets, typically limited service, are underwritten with higher DSCR and lower LTVs.

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This entry was posted in CMBS, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit and tagged , , . Bookmark the permalink.

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