Madison, Newbond Launch $500M Hospitality Lending Platform

Madison Realty Capital and Newbond Holdings have launched Madison Newbond, a hospitality fund with $500 million in initial lending capacity for first mortgages, mezzanine loans and preferred equity.

The $500 million will be increased in line with the opportunity.

The partnership will offer financing programs to new and existing borrowers from limited-service hotels to ultra-luxury resorts and will target opportunities including transitional lending and ground up developments across major metropolitan markets.

Acknowledging the decline in customers the hospitality industry was faced with during the Covid-19 pandemic, Josh Zegen, Managing Principal and Co-Founder of Madison Realty Capital said there is a clear need for creative and flexible lending solutions for hotel owners to recover from the changes to their business plans.

Madison has experience in the space, having recently made a $105 million loan to Fort Partners for the acquisition and modernization of the Four Seasons Hotel Miami and a $210 million loan to Fort Partners for the construction of the Four Seasons Hotel and Private Residences Fort Lauderdale.

As the fund enters the market, prospects for the hospitality space have been brightening, according to a recent Marcus & Millichap report.

“Loosened capacity restrictions, vaccine availability and pent-up travel demand led to a marked increase in trips taken and rooms occupied,” the report said. “By the end of July foot traffic through airport checkpoints had recovered to about 80% of 2019 volumes, driven largely by leisure travelers, while hotel occupancy had roughly doubled from where it began 2021.”

Adding to the reason for optimism for the rest of the year, the study said nightly rates improved even more notably, with the average daily rate for July surpassing the same metric from two years prior by 6 percent.

Not all elements of the hotel industry are seeing the recovery, M&M cautioned.

The report said a select number of properties continue to be severely impaired. Hotels in major urban centers and frequent convention markets will see improved operations in 2022 but will remain the most troubled segment. “Through September of this year hotels in core areas reported RevPAR values more than 25% below levels from two years prior, a steeper margin than for most other hotels.”

M&M said these hotels have been particularly hit by the decline in international travelers. Now that the US has lifted the pandemic-era travel ban, hopefully those numbers will reverse.