Hotel Funding - Guidelines

The current market is very unstable with lenders in the main only supporting those projects which are committed to be operated by the internationally established hotel operators.

The market is further limited by lenders who will only consider fully repairing and insuring (FR&I) tenants (operators) leases or management contracts which contain minimum return to the owners (see number 2. below)

The international hotel market divides into two sectors:
 

The Owner Occupied Market

Here the track record and experience of the borrower determines the funding structures that are available.
Situations need to be evaluated on a case-by-case basis. CLP work with experienced lenders in this sector.

Third Party Investors 

This is where the investor is at arm's length form the hotel operator. The operator commits to managing the hotel for a given period of time (the longer the better)

There are three styles of management contact:

1. A pure management contract                                                                                                                                                                        

 This is where the operator agrees his reward structure and all profits after the operator's returns, are for the benefit of the investor 

Availability of funding

This is the least attractive to lenders as there is no certainty of income to service the debt so their loan to value will be more cautious 

2. A management contract with “investors annual priority return” (sometimes referred to as “Capped Guaranteed Income”)

This is where the operator agrees his reward structure and all profits after the operator’s returns are for the benefits of the investor. However, in this instance the operator agrees an “investors annual priority return”.

Structure

Availability of funding