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Press Release
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Contact: Nick Derasmo (212.841.7505) |
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International Lodging Finance Council Announces the Results
of its Annual Survey of Finance Professionals
Lender Sentiment Turns Cautious on Fears of a General Economic Slowdown and Refinancing Risks of Existing Positions
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Wednesday, May 07, 2008
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San Francisco , CA
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The International Lodging Finance Council (ILFC) is pleased to announce the results of its annual survey of active senior and subordinate hotel lenders. This year’s survey asked respondents to compare the real estate finance climates of 2007 to 2008, the results of which reflected the pronounced shift in lender sentiment to a more cautious approach to hospitality financing. The survey was initially presented by ILFC co-chairs Robert Stiles and Mike Cahill at the 2008 RealShare Hotel Investment & Finance Summit.
The ILFC survey was completed by 41 active hotel lenders representing a broad cross section of capital sources, including Wall Street investment banks, large commercial banks, finance companies and insurance companies.
“There is no doubt that the degree of available leverage has been dramatically reduced in the past year and the ILFC survey clearly reflected this trend,” said Robert Stiles, executive vice president and principal of Cushman & Wakefield Sonnenblick Goldman. “Last year, the strong majority of respondents were prepared to fund at or above 75 percent of the appraised value for an existing hotel. Today, balance sheet lenders are now largely focused on leverage in the 60-65 percent loan-to-value range – with select high leverage lenders still participating in the market.”
According to the survey, balance sheet lenders, which are most active in the current environment, reported that existing relationships, a sponsor’s track record, experience, and financial strength are more important than ever.
“When asked what was perceived to be the biggest threat to their existing hotel loan portfolio, nearly all senior balance sheet lenders cited the general economic slowdown and the inability of a borrower to roll-over or refinance,” said Mike Cahill, president and founder, HREC - Hospitality Real Estate Counselors. “Lenders are concerned that high-leverage loans may not be able to be refinanced given lower loan-to-value thresholds and a decline in overall lodging property values from the recent peaks.”
Other highlights of the 2008 survey include:
• Hotel lenders predict a big decline in 2008 origination volume.
• The debt debacle is predicted to last one to two more years for the hotel industry.
• New additions to the hotel supply is the top concern for lenders.
• 88% of council members predict hotel values will continue to decline.
• Budget hotels and highway market hotels are at the highest levels of perceived risk.
• Lenders have less money allocated for hotel loans in 2008 than in 2007.
• Overall, lenders are “generally cautious about hotel market trends but open for business.”
For a copy of the 2008 ILFC survey, please contact Rob Stiles at robert.stiles@cushwake.com or Mike Cahill at mcahill@hrec.com.
About International Lodging Finance Council
The International Lodging Finance Council (ILFC) was established in 2005 to provide membership with objective forums that address industry research, trends and provide for the exchange of information both within the organization as well as to the benefit of the general investment community. The ILFC is comprised of the largest international providers of debt capital to the lodging industry and is constituted by balance sheet, conduit, construction and subordinate lenders.
About HREC – Hospitality Real Estate Counselors
HREC - Hospitality Real Estate Counselors is internationally recognized as a preeminent real estate advisory and brokerage organization specializing exclusively in the lodging and gaming industries. HREC is actively involved in providing investment banking (property and mortgage brokerage), consulting, asset management and development counseling services throughout North America with offices in Denver, New York, Chicago, Los Angeles, Tampa, Dallas and Memphis. More information on the benefits of HREC for your business can be found at www.hrec.com.
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About Cushman & Wakefield Sonnenblick Goldman
Cushman & Wakefield Sonnenblick Goldman is the industry’s leading independent real estate investment banking firm. The firm was founded as Sonnenblick Goldman in 1893 and it merged with Cushman & Wakefield in 2007. Cushman & Wakefield Sonnenblick Goldman provides a full range of real estate financial services, including debt and equity placements, joint ventures, hospitality investment sales and workout advisory services, and it collaborates world-wide with other divisions of Cushman & Wakefield. Further information can be found at the firm’s website at www.cushwake.com/sonngold.
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