Hospitality Loans: An Inside Look at the Market and Financing Sources

ATLANTA—The big question on everyone’s minds is when? Of course, this refers to the interest rate increase. Most acknowledge that the Fed rate hike won’t be very impactful, and in fact, most wish it would have happened already. The capital stack tightened down in the recession, with CMBS in particular down to around 9% of the market in terms of lending. It went back out to about 40% in 2014 and is accounting for around 36% of the market this year. CMBS lending is at about $80 billion now, anticipated to reach $100 billion by the end of the year.

There’s a lot of involvement from commercial banks, certainly CMBS, and life insurance companies are at around 18% of the market. It’s a naturalized market share division between these groups, which has helped to support market values, and the market is more normalized overall at this point. Another trend of note is the emergence of crowdfunding. It represents a big piece of the equity component, both for new construction and repositioning.