Financing acquisitions when expenses
are unusually high and profits are low is fairly
difficult. It is often a mundane process to add back very few seller
expenses such as depreciation, amortization, and interest to the
cashflow but when there are multiple addbacks that are not individually
itemized, identifying and verifying them is a difficult task.
Additionally, even when these addbacks are identified, the lenders may
show little appetite for applying all these addbacks. Our challenge in
this project was exactly that where we had to analyze the financials,
to extract the addbacks, and to find lenders with appetite to finance
these hotels when cashflow would only be positive after these adbacks.
However, with usual diligence that the Scientific Capital puts into the
projects, two lenders were separately identified as candidates for this
Both hotels are financed under conventional loans for a total of
12.5 million where Clarion is financed at 80% Loan to Value with 1
million PIP and Holiday Inn Express at 70% LTV of 8.5 million and 25