Access Point Financial CEO trades Making Music for Making Deals

June 25, 2018

by Jena Tesse Fox | 

Jon Wright had planned on a career in music, but instead found his livelihood in financing hotels. As the founder and CEO of Atlanta-based Access Point Financial, Wright leads a team of industry veterans in hospitality finance, supporting mortgages, new developments and renovations.

Growing up with a love of music inspired by his father (who he describes as being like the protagonist from “Mr. Holland’s Opus”) and his brother Mark, a songwriter/producer and current president of Show Dog-Universal Music, Wright originally had planned to spend his life creating songs. After graduating from the University of Arkansas, Wright followed his brother to Nashville to gain experience in the music industry, but needed a day job to pay the bills. He began training at the Ford Motor program for a role in junior management in its asset-based lending group, and soon was working in the company’s corporate real estate and asset-backed securities division, financing the “contents” of real estate—“everything but the land and building,” he said. In this role, he developed a taste for the financing industry—and for meeting the heads of corporate finance departments within large institutional corporations.

After four years, he was invited to interview with Holiday Inn Worldwide in Memphis. “Kemmons Wilson, the founder of Holiday Inn, had pioneered an in-house finance company called General Innkeepers Acceptance Corporation,” Wright said. The franchise industry was becoming very competitive, and Wilson wanted to jumpstart his “dormant” company by offering financing for Holiday Inn franchisees. Wright moved to Memphis and took over as managing director at GIAC, originating loans for franchise owners, overseeing the company’s finance subsidiary and supporting franchisee growth through senior- and sub-debt origination and syndication. “The first generation of hoteliers were still running the companies,” Wright recalled of those late-’80s days. “They were in the process of passing down their operations, their ownership of hotels through their family members. I was able to meet the first generation of franchise owners.”

 By the late 1990s, General Motors was looking to gain a foothold in the hospitality sector, and recognized how Wright’s experience could help it grow. “After nearly 10 years with Holiday Inn, I started the asset-based finance group for General Motors,” he said. Over the next eight years, the GMAC Commercial Mortgage—Asset Backed Lending Division supported hospitality-related developments, either owned or serviced, to the tune of more than $4 billion. In 2005, he structured the group’s sale to an Atlanta-based bank consortium, renaming the division Specialty Finance Group.

When the financial crisis began, Wright’s team stopped originating loans. “We maintained our servicing function, so we were managing our book of $2 billion—which was eventually sold to Blackstone in 2011,” he said. After that transaction, Wright worked with Greenwich, Conn.-based private equity investment firm Stone Point Capital to launch Access Point Financial and jumpstart originations again once the economy began to improve in 2011.

Jon Wright, Access Point Financial
Jon Wright, founder and CEO of Access Point Financial
Photo credit: Access Point Financial

 

As a lender, said Wright, Access Point has a unique position in the hospitality hierarchy—neither owner or operator, but involved in developments and redevelopments. “We don’t compete with our borrowers,” he said. “You could imagine that if you’re wanting to borrow money from a bank for your hotel, you don’t want to have to look over your shoulder every day when you turn the lights on, wondering if something is happening with your loan.”

What keeps Access Point competitive over time, said Wright, is the company’s focus on what a property’s profits will be like after the opening or renovation—in some cases, years in advance. “We will look two years out at where the performance levels and trends will be in that time frame, and then we will lend against that loan-to-value, looking into the future,” he said. “And so although we might be a bit more expensive than banks in some transactions, we can advance more proceeds because we’re giving you credit to future cash flows post-renovation.”

Clicking With Clients

“Our reputation over the years has kept us in the game. The brands recognize us. They refer us [to owners] very freely and very confidently because we issue term sheets with quick turnaround times and then we followed through. We do what we say we will do, and we do it quickly and we do it efficiently. It also goes to the point of, treating all of the brands with equal respect whenever we finance brands or even boutique hotels that are unbranded—that pricing and structure is either credit-worthy or not and we won’t be reducing our pricing or extending the terms of the amortization just because we prefer one brand over the other. That’s not the case. We’re agnostic to branding.”

Logic in Logistics

“For existing assets, we pay heavy attention to loan-to-value. For new assets that are coming out of the ground, loan-to-cost is at the top of our list, and not so much loan-to-value, because there are no cash flows that have occurred yet to give us a sense of comfort on what the loan-to-value is of that asset. For new assets coming out of the ground—and sometimes assets that are trading hands—our typical loan is to assets and ownership groups that are investing in break-even (and sometimes south of break-even) cash flows because they intend to put new capital in, new equity, fresh powder into the hotel and upgrade it. Then we look for, like I said before, the pro forma of cash flow two years ahead of our closing of the loan, so that the operator is getting credit for taking risks, for instituting a renovation project and then reopening the asset. That’s when the larger lenders and the institutions come in and refinance us, and we’re able to regenerate our capital that way.”

 

Source: https://www.hotelmanagement.net/financing/how-access-point-financial-ceo-jon-wright-decides-what-hotel-projects-to-back

Not All Hotel Lending Is Created Equal- The right disaster-recovery financing can speed a return to normalcy

June 4, 2018

Help-wanted pleas can apply to many things after a hurricane or other natural disaster ravages a city. That includes “help wanted” in the form of financing assistance for hotels seeking to cope with the damages caused by such disasters.

Through creative loan structuring, commercial mortgage brokers can help lighten the burden of hotel developers and owner-operators who need to rehabilitate or totally rebuild their disaster-stricken properties. In such cases, mortgage brokers should first ask their hospitality clients about insurance proceeds that may be available to restore the properties.

Interim financing should be arranged if there’s a shortfall on the insurance side or when an owner wants to take the opportunity to upgrade the property beyond its pre-disaster condition. A lender will want to know that the projected net operating income the hotel will achieve after the renovation will be sufficient to justify a permanent loan to replace the interim loan used to finance the renovation work, says David Sonnenblick, co-founder and principal at real estate investment bank Sonnenblick-Eichner Co.

A mortgage broker should determine the property’s performance level prior to the hurricane or other natural disaster. Also, Sonnenblick adds, the broker needs to know how other hotels in the market were performing prior to the disaster.

Financing details

The owner of an Atlantic Beach hotel could not rebound from Hurricane Irene after it struck the North Carolina coast in 2011. A direct lender handled the refinancing for the property under a new owner. The arranged deal freed up proceeds for other needs as well, beyond the renovation and conversion capital.

The financial institution was able to structure bridge financing within 10 days of application. The hotel, under a new flag, reopened in 2013. With the resulting boost in revenue, the new owner was able to refinance the property at a lower interest rate and 37 percent greater leverage, according to Access Point Financial.

Sonnenblick points out that lenders doing these types of interim loans are often either commercial banks or private debt funds. Commercial banks, compared with private nonbanks, will normally require recourse and usually offer slightly better rates and a bit lower loan-to-cost (LTC) ratio — look for around 50 percent to 60 percent — on interim financing for renovating a damaged hotel property.

A little more expensive, private debt funds will offer recovery capital in the 6 percent to 8 percent rate range, depending on the property. They also will typically take a slightly higher place in the capital stack. Private debt funds may go as high as 70 percent, 75 percent and, in some cases, 80 percent on the LTC, with respect to the costs of fixing the damage as a result of a hurricane and repositioning the hotel in the market, according to Sonnenblick.

Mortgage brokers should understand how the capital stack is structured and also whether lenders will be willing to participate in deals in which they don’t have a priority position in the event of default, says Dharmesh Patel, executive managing director of hotels for Colliers International and the recent chair of Colliers’ national hospitality practice group for hotel-investment sales.

“One of the major trends in hotel development we see in this cycle is that the borrowing is more conservative and the developers are putting more equity into their deals,” Patel adds. “Current debt ratios are often 60 to 65 percent, compared with 75 percent or more in the last cycle, so mortgage brokers have less to work with and may need multiple lending sources to suit their clients’ needs.”

Braving the storm

The effects of a major hurricane on a city’s hospitality industry extend from property damage to lost jobs, canceled future bookings and more. Recovery capital in the form of interim loans can serve as a bridge over troubled financial waters for hotel owner-operators in storm-ravaged markets.

“ Mortgage brokers can help by having an open discussion with these borrowers about predatory lenders and their tactics. ”

“It’s one thing when you have to manage delinquent borrowers, but we’re talking about relieving the burden of good operators in bad, often very challenging situations,” says Jon Wright, chairman and CEO of Atlanta-based Access Point Financial, a hospitality-market direct lender. “As owner-operators, it’s obviously the bulk of their livelihood. In most [disaster] instances, it’s then the panic button.”

The financial costs for hotel operators and owners can be staggering in the wake of a major natural disaster. Hurricane Harvey, which this past August flooded extensive sections of Houston — the nation’s fifth-largest metro area — could ultimately entail total damages of between $70 billion and $190 billion. The latter estimate is equivalent to the combined toll of hurricanes Katrina and Sandy, and represents a 1 percent hit to the national economy.

In most instances, owner-operators have to play the waiting game as well — waiting on insurance proceeds and other reimbursements after such destructive, naturally occurring events make life and business anything but normal. Delayed-payment plans and other financial concessions from lenders can go a long way when hotels are picking up the pieces after a storm.

One direct lender in the hotel sector, for example, offers select borrowers affected by such natural disasters a financing plan that includes six to 12 months of no payments and 18 months of interest-only payments. Rates stay in the standard 7 percent to 9 percent range for loan amounts typically ranging between $50,000 and $15 million.

Borrower beware

In the aftermath of a devastating hurricane, hotel owner-operators with distressed properties may be tempted to jump at a seemingly easy financing offer. Mortgage brokers can help by having an open discussion with these borrowers about predatory lenders and their tactics, including the financial reward some lenders pay brokers for placing loans with inflated interest rates.

“If it’s too good to be true, it might well be,” Access Point’s Wright said. “Borrowers [and brokers] need to be on very high alert as to who they’re dealing with. It’s not uncommon to find out lenders are really injecting capital under false pretense with the objective of taking back the property or, at the very least, taking over management of the asset.”

Business-interruption insurance can be another critical source of assistance that can help property owners stay calm and avoid making bad financing decisions while a hotel is recovering, Sonnenblick says. This insurance can help pay for operations and debt service so owner-operators are protected, typically for 24 months of interruption.

With predatory lending always a factor in the market, especially in the wake of a major disaster, it’s imperative for mortgage brokers and hotel owner-operators to dive deep into a financial institution’s history before inking a deal. The interest rate should not be the sole litmus test for doing business with a particular lender, Wright adds.

 

Source: https://www.scotsmanguide.com/Commercial/Articles/2018/04/Not-All-Hotel-Lending-Is-Created-Equal/

Access Point Financial Aims for $600Mln of Hotel Loan Originations This Year

June 4, 2018

Wednesday, 02 May 2018

Commercial Real Estate Direct Staff Report

Access Point Financial Inc., a hotel lending specialist whose principals have completed more than $7.5 billion of loans, expects to fund $600 million of mortgages this year.

The Atlanta company is led by Jon S. Wright, chairman and chief executive, who had founded it seven years ago. It focuses on providing small- to middle-market loans against properties that generally are undergoing renovations to make them eligible for a national brand and franchise.

It funds bridge and construction loans, and writes mortgages to fund capital expenditures and furniture, fixtures and equipment. Hotel owners also often turn to it to fund renovations designed to allow a property to get a national brand and franchise agreement.

It will write loans from $50,000 to $90 million. But its sweet spot is anywhere from $10 million to $15 million.

Its average loan has a balance of $3 million. Wright said his team will write anywhere from 200 to 250 loans this year. Its loans typically are structured with a term of three years, with possible extensions, and require a fee of 1 to 2 percent on origination and pay off. Coupons range from 7 percent to 12 percent, depending on where in the capital stack it’s playing, the value of collateral and types of guarantees.

Wright noted that it had provided…

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Source: https://www.crenews.com/top_stories_-_free/top_stories_subscriber/access-point-financial-aims-for-$600mln-of-hotel-loan-originations-this-year.html

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Access Point Financial CEO trades Making Music for Making Deals

June 25, 2018

by Jena Tesse Fox | 

Jon Wright had planned on a career in music, but instead found his livelihood in financing hotels. As the founder and CEO of Atlanta-based Access Point Financial, Wright leads a team of industry veterans in hospitality finance, supporting mortgages, new developments and renovations.

Growing up with a love of music inspired by his father (who he describes as being like the protagonist from “Mr. Holland’s Opus”) and his brother Mark, a songwriter/producer and current president of Show Dog-Universal Music, Wright originally had planned to spend his life creating songs. After graduating from the University of Arkansas, Wright followed his brother to Nashville to gain experience in the music industry, but needed a day job to pay the bills. He began training at the Ford Motor program for a role in junior management in its asset-based lending group, and soon was working in the company’s corporate real estate and asset-backed securities division, financing the “contents” of real estate—“everything but the land and building,” he said. In this role, he developed a taste for the financing industry—and for meeting the heads of corporate finance departments within large institutional corporations.

After four years, he was invited to interview with Holiday Inn Worldwide in Memphis. “Kemmons Wilson, the founder of Holiday Inn, had pioneered an in-house finance company called General Innkeepers Acceptance Corporation,” Wright said. The franchise industry was becoming very competitive, and Wilson wanted to jumpstart his “dormant” company by offering financing for Holiday Inn franchisees. Wright moved to Memphis and took over as managing director at GIAC, originating loans for franchise owners, overseeing the company’s finance subsidiary and supporting franchisee growth through senior- and sub-debt origination and syndication. “The first generation of hoteliers were still running the companies,” Wright recalled of those late-’80s days. “They were in the process of passing down their operations, their ownership of hotels through their family members. I was able to meet the first generation of franchise owners.”

 By the late 1990s, General Motors was looking to gain a foothold in the hospitality sector, and recognized how Wright’s experience could help it grow. “After nearly 10 years with Holiday Inn, I started the asset-based finance group for General Motors,” he said. Over the next eight years, the GMAC Commercial Mortgage—Asset Backed Lending Division supported hospitality-related developments, either owned or serviced, to the tune of more than $4 billion. In 2005, he structured the group’s sale to an Atlanta-based bank consortium, renaming the division Specialty Finance Group.

When the financial crisis began, Wright’s team stopped originating loans. “We maintained our servicing function, so we were managing our book of $2 billion—which was eventually sold to Blackstone in 2011,” he said. After that transaction, Wright worked with Greenwich, Conn.-based private equity investment firm Stone Point Capital to launch Access Point Financial and jumpstart originations again once the economy began to improve in 2011.

Jon Wright, Access Point Financial
Jon Wright, founder and CEO of Access Point Financial
Photo credit: Access Point Financial

 

As a lender, said Wright, Access Point has a unique position in the hospitality hierarchy—neither owner or operator, but involved in developments and redevelopments. “We don’t compete with our borrowers,” he said. “You could imagine that if you’re wanting to borrow money from a bank for your hotel, you don’t want to have to look over your shoulder every day when you turn the lights on, wondering if something is happening with your loan.”

What keeps Access Point competitive over time, said Wright, is the company’s focus on what a property’s profits will be like after the opening or renovation—in some cases, years in advance. “We will look two years out at where the performance levels and trends will be in that time frame, and then we will lend against that loan-to-value, looking into the future,” he said. “And so although we might be a bit more expensive than banks in some transactions, we can advance more proceeds because we’re giving you credit to future cash flows post-renovation.”

Clicking With Clients

“Our reputation over the years has kept us in the game. The brands recognize us. They refer us [to owners] very freely and very confidently because we issue term sheets with quick turnaround times and then we followed through. We do what we say we will do, and we do it quickly and we do it efficiently. It also goes to the point of, treating all of the brands with equal respect whenever we finance brands or even boutique hotels that are unbranded—that pricing and structure is either credit-worthy or not and we won’t be reducing our pricing or extending the terms of the amortization just because we prefer one brand over the other. That’s not the case. We’re agnostic to branding.”

Logic in Logistics

“For existing assets, we pay heavy attention to loan-to-value. For new assets that are coming out of the ground, loan-to-cost is at the top of our list, and not so much loan-to-value, because there are no cash flows that have occurred yet to give us a sense of comfort on what the loan-to-value is of that asset. For new assets coming out of the ground—and sometimes assets that are trading hands—our typical loan is to assets and ownership groups that are investing in break-even (and sometimes south of break-even) cash flows because they intend to put new capital in, new equity, fresh powder into the hotel and upgrade it. Then we look for, like I said before, the pro forma of cash flow two years ahead of our closing of the loan, so that the operator is getting credit for taking risks, for instituting a renovation project and then reopening the asset. That’s when the larger lenders and the institutions come in and refinance us, and we’re able to regenerate our capital that way.”

 

Source: https://www.hotelmanagement.net/financing/how-access-point-financial-ceo-jon-wright-decides-what-hotel-projects-to-back