MIAMI—Underwriters are paying attention to the hotel dynamics in Florida, which is seeing both a population and tourist boom. What changes are ahead?
GlobeSt.com caught up with Ben Miller and Casey Siggins, directors of Loan Origination at Franklin Street, to get some answers. You can still read part one of this interview: Is Florida's Hotel Market in Danger of Overbuilding?
GlobeSt.com: How will Florida's hotel construction lender underwriting change going forward?
Miller: Underwriters will take a close look at how properties in that area performed during the last downturn to see the viability of that construction project. They will look back about 10 years to the peak of the recession, which were the roughest years for hotel financing, as a check on viability.
Underwriters will also continue to stress metrics such as Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR). They will do this to determine how that project will sustain on a new financing deal and during a stressed economy.
GlobeSt.com: Which hotel properties and projects will lenders target for construction this year? And why?
Miller: Builders are targeting the downtown core markets such as Downtown Tampa. Tampa is undergoing a massive $3 billion redevelopment project over the next three years, so they'll be looking to add hotel rooms downtown.
Siggins: Hotel developers are also interested in select areas outside of core markets where there is a reasonable expectation of demand. For example, Franklin Street is actively working on financing an 88-room, flag hotel project in the Greater Tampa area with an approximate value of $14 million.
GlobeSt.com: What will be the typical loan-to-cost (LTC) ratio on a hotel construction loan?
Miller: The typical LTC will be in the 60 to 65% range and maybe up to 70% for the top-tier flags and sponsors. We expect the current ratio to remain flat based on the existing market supply.
The LTC has experienced a slight decrease from three years ago when it was at about 70 to 75%. But the leverage points are lower now because banks are hedging against the risk and timing of the cycle.
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