September 16, 2016

Conservative Lending Prevails in Hotel Sector

ATLANTA—Jon S. Wright, chief executive officer of Access Point Financial, recently discussed what types of issues the hospitality industry is facing in the current lending climate. In a recent interview, he shared his views and what is in store for hospitality lending in the foreseeable future.

GlobeSt.com: How conservative is the lending community right now? Would you say hospitality is being disciplined? How so?

Jon Wright: The Fed has effectively tightened up-clarified regulations pertaining to restrictions/language that hotels book only a finite exposure for hospitality. Access Point Financial has carved out a niche whereby not only mortgage, but also Capex – C&I are inclusive in our product offerings, alongside leverage partners (via globally recognized banks) which facilitates production levels commensurate with our funding projections of roughly $500MM for 2016. We simply don’t see many newcomers in this space due to increased oversight and regulations currently in place. We’ve kept our finger on the pulse of the industry for 25 years. There is a human tendency to rush to complete a loan but such exuberance is too aggressive. Although we may take a risk on the front end, historically, we have taken a conservative approach and are long-term players. We target low to mid-teens refinanced every 18 months, which are attractive to banks with their conservative approach. We keep current for investor appetites with packages leveraged. We weather storms by keeping the lines of credit healthy if the music stops again.

GlobeSt.com: Given the current climate, is now a time to refinance, sell, buy? Why? What type of pricing expectations should owners have?

Wright: Depending on a variety of variables, each owner operator currently is, or has already, refinanced eligible assets. Access Point Financial tends to lean towards prevailing and bullish opinions that the timing is ripe to sell with cap rates starting to rise, many owners are looking to cash OUT on increased values during the last few years.  An increase in supply in some markets may have an impact on performance which could possibly have an owner looking to exit prior to continued dilution of value. With historically low interest rates and the CMBS market deviable, refinancing is a possible option for many borrowers.

GlobeSt.com: How would you evaluate the quality of deals you’re currently seeing?

Wright: Because of long term presence and reputation, we’ve been able to improve our capabilities to weather downturns. Marginal developers don’t come to us; our hit rate is high as we pre-screen with a consistent message and don’t spend time with investments that aren’t feasible. A food chain of viable loans develops over time. For example, we don’t service new owner-operator transactions.

GlobeSt.com: Typically, what kind of underwriting are you seeing? What factors are you looking at when you’re underwriting?

Wright: We look at LTV or LTC for projects that can be upgraded and stabilized. There are clear definitions of LTV/LTC that require owners to have real cash and not just pay for play appraisals.

They must have skin in the game because it is not a one-size-fits-all play. Today’s technology provides background checks instantaneously. We normally know about deals and respective players because of the relationships we’ve developed over almost 3 decades.

The interview was originally posted on GlobeSt.com.

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