On March 30-31, 2016, ValueXpress exhibited at the annual Asian American Hotel Owners (AAHOA) Trade Show, which was held in Nashville, Tennessee this year. The sold-out trade show was attended by a record crowd of Asian American hoteliers ready to put recent volatility in CMBS lending behind them and get back to borrowing money.
“We had a significant amount of inquiries from clients looking to complete cash-out refinancing of their hotel properties,” commented Jay Bhakta, Senior Loan Originator at ValueXpress. “Many owners were looking to use the cash-out proceeds to complete Property Improvement Plans (PIPs) required to renew franchises. For example, some noted that it could easily cost $1 million to complete the new ‘Formula Blue’ PIP required by IHG for the renewal of Holiday Inn Express franchises,” noted Bhakta. “CMBS conduit loans, with their unrestricted cash-out provisions, are ideally suited for hotel properties requiring expensive PIPs so owners do not have to come out of pocket to pay for the PIPs.”
“In addition, we had requests for portfolio loans in which the owner gets one loan secured by a portfolio of properties, consolidating a variety of local lenders into one loan, converting recourse loans into non-recourse and obtaining cash-out proceeds for additional investments,” noted Michael D. Sneden, Executive Vice President at ValueXpress.
“In one case, the owner wished to build a new Hampton Inn property, but his local community bank wanted cash equity of 35%, or nearly $3 million, invested in the $8-million project. The owner only had $2 million cash on hand, so we are going to provide a $1-million cash-out on a Holiday Inn Express owned by the sponsor,” noted Bhakta.