“I wanted to share with readers a recent experience that typifies our mission to help clients and why I come to work every day,” said Michael D. Sneden, Executive Vice President at ValueXpress. ValueXpress recently received a loan request from one of its key intermediaries for a hotel loan in San Jose, California. The sponsor’s loan had matured, and he had just received a maturity default and foreclosure notice. In addition, the sponsor needed another $5 million to close on the acquisition of another property in which a $750,000 deposit had become non-refundable. The sponsor had never done a CMBS conduit loan.
ValueXpress received the executed loan application on Sunday evening and I was on a plane to San Jose on Monday. When the sponsor picked me up at the airport at 11 p.m., he said the magic words, “Mike, you tell me what to do, and I will do it. Fast!” We started at 8 a.m. on Tuesday, and one by one, we knocked off all the property diligence checklist items. Then the sponsor said, “Mike, can we do the majority of the legal checklist to move faster and save on cost?” I agreed. So we ordered the title report, survey, comfort letter and gathered the organizational documents. I left on Thursday night with the property diligence checklist 100% complete and the legal checklist 75% complete. When we called borrower’s counsel, he said, “Wow! All I need to do is form a corporate Managing Member, review the loan docs, provide our opinions and close!”
It gets better. The borrower owns the restaurant adjacent to the hotel and did not realize he could finance the unencumbered property with the hotel. With the restaurant included, the loan was increased by $2.5 million. Then by organizing the income and expense statements into the Uniform System of Hotel Accounts and refining the cash flows, the appraisal value came in higher than expected! The loan was increased by another $3 million, resulting in a cash-out of $10 million versus $5 million. Can you say happy borrower?
“When I left, the sponsor could not thank me enough,” said Sneden. “He said, ‘Mike I learned more about commercial real estate finance for hotels in the last three days than in my entire career.’ ” Needless to say, we are completing a follow-on transaction for another hotel property owned by the sponsor located at the San Jose Airport and we will be completing more after that.