Hotel Lenders See Slowdown Threats, Risks

NEW YORK CITY-Although many speakers at Real Estate Media’s RealShare Hotel Investment & Finance Summit stressed opportunity in today’s current market, others, including some hotel lenders, had a more pessimistic point of view. According to survey results presented during the International Lodging Finance Council Top 10 panel, roughly 52% of hotel lender respondents believed that their lending volume would decrease over the next 12 months, 30% of which believed that it would be a significant decrease.

During the Top 10 panel, speaker Michael Cahill, president and founder of HREC Investment Advisors, said that the 41 survey respondents—which consisted of hotel lending operators throughout the country—were more pessimistic and cautious about market trends in ’08 than a year ago. He explained to the audience of over 350 that 39% believe that spreads will be flat compared to last year.

Hotel lenders see three threats, such as general economic slowdown, refinancing risks due to higher exit cap rates, and an increase in competitive supply, Cahill explained. As far as loan to value ratio goes, Cahill said that in 2007, 65% of lenders would exceed 75%, however in 2008, zero would exceed 70% and only 19% would go up to 75%.