Commercial Hotel Loans From an Experienced Principal Lender
First National provides commercial real estate financing for qualified owners, purchasers and experienced sponsors of branded hotel and hospitality properties.
For more than four decades, First National has originated, underwritten, closed and serviced commercial real estate loans. As a principal lender, First National provides its own capital, performs its own underwriting and makes its own lending decisions.
Hotels are specialized operating properties. Occupancy, room rates, brand affiliation, management, competitive supply, property condition, franchise requirements and capital expenditures can all materially affect operating performance and value. First National’s experience with specialized commercial assets allows us to evaluate both the real estate and the operating business supporting it.
Borrowers work directly with the lender evaluating and funding the request.
Our lending process reflects the specialized nature of hotel and hospitality assets.
First National considers financing for qualified branded hotel and hospitality properties.
Hotel financing may be available for:
Minimum Loan Amount: $5 million
Typical Loan Size: $10 million to $18 million
First National’s hotel lending program is generally directed toward branded and qualified hospitality properties and does not include motels or independent hotels.
First National considers qualified properties throughout the continental United States, excluding North Dakota and Louisiana. First National does not presently lend in Alaska or Hawaii.
Each transaction is individually underwritten. Loan structure and final terms depend upon the property, sponsorship, operating performance, collateral, market and other underwriting considerations.
First National considers financing for a range of qualified branded hotel and hospitality transactions, including bridge financing when appropriate:
Owners, purchasers and qualified sponsors seeking financing for branded hotel and hospitality properties are invited to contact First National for an initial review.
Preparing for hotel financing starts with understanding what a lender will evaluate. Our complimentary guide covers occupancy, ADR and RevPAR, brand and franchise requirements, Property Improvement Plans, management and First National’s published hotel program parameters.
It also includes a document list to help you organize the information typically needed before starting a financing conversation.
Hotel underwriting requires more than reviewing the value of the underlying real estate.
A hotel is both real estate and an operating business. Its financial performance can respond quickly to changes in room rates, occupancy, competition, operating expenses and market demand.
First National therefore seeks to understand the factors producing the hotel’s historical cash flow and whether that performance appears sustainable.
Several years of operating history can help establish how the hotel has performed through changing market conditions.
ADR provides information about the average room rate actually achieved and helps a lender understand the hotel’s pricing position.
First National may consider how the property performs relative to competing hotels in its market. This may include evaluating nearby supply, brand strength, rate positioning, demand drivers and how the hotel compares within its competitive set.
The experience and performance of hotel management can materially influence revenue, operating costs, guest experience and property condition.
Current occupancy is important, but occupancy trends and the rates being achieved for occupied rooms can provide a more complete picture.
RevPAR combines occupancy and room-rate performance and can provide useful insight into how effectively the hotel is generating room revenue from its available inventory.
Brand affiliation, remaining franchise term, franchise requirements and the property’s standing with the franchisor can materially affect hotel operations and financing.
Deferred maintenance and required improvements can affect both near-term cash flow and the capital required following closing.
Hotel underwriting may include historical cash flow, occupancy, ADR, RevPAR, operating expenses, brand affiliation, PIP requirements, management, property condition, competitive position, sponsorship and property value.
Occupancy is important, but it should not be considered by itself. Room rates, RevPAR, operating expenses, seasonality and the factors producing occupancy are also important when evaluating sustainable hotel performance.
ADR, or Average Daily Rate, measures the average room rate achieved for occupied rooms during a particular period.
RevPAR, or Revenue Per Available Room, measures room revenue relative to the total rooms available. It reflects the combined effect of occupancy and room rates.
A PIP can require a substantial capital investment and may be associated with maintaining or transferring a hotel franchise. The cost, timing and source of funds therefore can materially affect an acquisition or refinancing.
First National’s hotel lending program is directed toward qualified branded hospitality properties and does not include motels or independent hotels.
First National’s minimum hotel loan amount is $5 million. Typical hotel loans are approximately $10 million to $18 million, although each transaction is individually evaluated.
Yes. First National considers acquisition financing for qualified purchasers and branded hotel properties.
Yes. First National considers financing involving major renovations and Property Improvement Plans when appropriate to the overall transaction.
Any appraisal relied upon by First National in making its lending decision is ordered directly by First National.
