MIAMI—Construction lending in the Florida hotel market is still active but it is changing and will continue to change. So say Ben Miller and Casey Siggins, directors of Loan Origination at Franklin Street.
Specifically, the duo used words like selective and sidelines. GlobeSt.com caught up with Miller and Siggins, to get their insights in part one of this exclusive interview.
Globest.com: What are your predictions for Florida's hotel construction lending going forward?
Miller: Construction lending will remain viable for good sites. As the market prepares for the next cycle, there will be stricter qualifications for hotel lenders with most lenders waiting on the sidelines. Leverage points will be in the 60 to 65% loan-to-cost range. For projects getting done sponsors will be required to have more cash in the deals.
Siggins: Lenders and capital sources will be more selective on the properties they fund and they will lend less. The project really needs to make sense financially for them.
Globest.com: Do you believe this property type has been overbuilt? Why or why not?
Miller: Florida's hotel sector is certainly not overbuilt. Developers can still push key hotel metrics such as Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) and occupancy numbers are high in most markets.
Siggins: The hotel occupancy numbers are at all-time highs. If they were overbuilt, then occupancy rates would not be as high as they are currently.
Globest.com: What will be the biggest changes or trends in hotel construction lending in the next six to 12 months versus years past?
Miller: The leverage points will be coming down and lenders will be more specific on location. Hotels would be one of the first property types to feel the strain of an economic downturn. Leisure travelers will be looking to reduce their discretionary expenses and businesses will cut down on their travel costs. We expect to see a decrease in funds for hotel construction lenders over the next 12 months.
GlobeSt.com: What specific lenders will be active in hotel construction lending this year?
Siggins: Community and regional banks and private debt funds will be among the most active lenders. Those lenders are directly connected to those submarkets so they understand the demographics much better than a national bank would.
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