Scientific Capital

Financing of a hotel purchase with $19 Million CMBS non-Recourse

loan in Tennessee

Holiday Inn Express Gatlinburg, Tennessee

In this project, we had two major factors to consider:

  1. Loan size: Generally, banks have less appetite to finance hotels for loans over $10 million. Although banks participate with their partner banks to fund larger loans, it still makes it unpalatable for a bank to put a large hotel loan on the books for a single borrower. preferring to have multiple borrowers with smaller loans, serving more customers, and taking a smaller risk.
  2. Non-Recourse: As hoteliers grow their portfolio and personally guarantee more loans, their contingent liabilities increase. In the case of hoteliers who syndicate a hotel acquisition with a number of partners, an unlimited personal guarantee of the loan maximizes their contingent liability to the loan amount. Their asset, however, remains equal to the equity injected multiplied by their percentage ownership. As a hotelier keeps acquiring new hotels through syndication, the contingent liability grows exponentially while the equity increases gradually.
In this project, our option was clear: a CMBS loan to easily accommodate both factors: CMBS loans easily handle larger loans and are non-recourse. Although the loan requires curve-out guarantors (also called bad boy guarantors), it does not require a personal guarantee. This $19 million loan will not count as the borrower’s contingent liability.
In addition, the client requested the longest I/O (Interest Only) period we could find in the market. This 25-year amortized CMBS loan is interest-only for 10 years, and no principal is paid until the loan matures. This makes this CMBS loan a good candidate for assumption since the balance remains the same at $19 million and, unless the value of the hotel increases, the Loan to Value remains at 65%.

What Our Client Thinks of Us

The amount of value Ramin adds to our deals is unparalleled. I never saw anyone in my professional journey who is so much on top of the game. I'm blessed to have Ramin as a team member and I look forward to closing many more deals in the future. 
HD Patel
Ephant Group

Our Other Projects With This Client

What differentiates us from the others is loyalty of our clients. Here is the other hotels that we financed for this client not to mention a number of referrals that we got from this client.

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