Scientific Capital

$5.1 Million Loan Request for the

Refinance of the

Motel 6 of Monahans, TX

Terms and Conditions

You are given access to this loan proposal memorandum because Scientific Capital has determined that you (LENDER) have indicated that you have interest in reviewing this loan request and the lending capacity in offering this loan. The information provided in this memorandum is confidential and may only be shared with LENDER’s internal staff and should not be shared with other lenders, brokers, vendors, and third parties unless authorized by Scientific Capital. LENDER is not authorized to pull credit from the borrowers unless the borrowers have signed LENDER’s authorization form.

This memorandum is prepared by Ramin Mostaan and any questions or comments should be directed to him at the following contact information:

Ramin Mostaan
Scientific Capital
949 477 5000 (Office)
949 302 8300 (Cell)
ramin@scicap.com

Transaction Overview

Purpose

To refinance the existing SBA 7a Pari-Passu loan on the Motel 6 of Monahans, a 74-room interior corridor hotel with an SBA 504 loan to improve the hotel’s profitability and cashflow. The existing SBA loan financed the construction/take-out of this Motel6. The borrowers never perceived that the PRIME rate which was 3.25% at that time would rise to 8.5%. The 5% increase is devastating to the business and the cashflow. The owners have injected funds for couple of years since the rates have gone up but tentatively, it appears that the rates will remain high for the next two years and it is reasonable to take measures and use 504 refinance to benefit from much lower interest rate.

Project Strength

  • The hotel was newly built in 2021, it is a new modern 4-story interior corridor building
  • Hotel revenue and profitability is increasing and is on an upward trend
  • Owners are experienced and financially strong with a number of hotel ownerships in Texas

Project Challenges

  • Instead of applying the hotel revenue towards marketing, advertisement, and sales, the resources are put towards high interest rate on the SBA 7a loan at 10.5%. The result has been that the stabilization of the hotel has taken longer and it is just at the cusp of going profitable at 1.25 DSCR

Proposed Financing Structure

Proposed Collaterals

  • First Deed of Trust on the subject property and first lien on the security interest
  • Additional collateral pledged by the borrower: NONE
  • Additional guarantee pledged by the borrower’s affiliates: NONE

Sources of Repayment

  • Primary source of repayment: The rent paid by occupants of the subject hotel
  • Secondary source of repayment: Borrower’s personal excess cashflow and liquid assets
  • Tertiary source of repayment: Liquidation of the property anticipated to be a 75% loan to appraised value
  • Final source of repayment: Enforcement of guarantee

Hotel's Financials and Information

Specifications

  • Address:  701 W Service Rd I-20, Monahans, TX 79756   
  • Rooms: 74
  • Corridor: Interior
  • Number of buildings: 1
  • Number of floors: 4
  • Building square feet: 
  • Lot size:

Location

Photos

Demand Generators and Customer Segmentation

The several major demand generators in the area are:

 

  • Roy Hurd Memorial Airport-E01 (1.2 miles – 4 min)
  • Ward Memorial Hospital (1.9 miles – 6 min)
  • Monahans Sandhills State Park (6.1 miles – 8 min)

Historical Cashflow

The DSCR is calculated assuming the following terms of the Third Party and the debenture loans: 

  • Third Party: CMT(4.25% as of the date of this memo) + 3.25% (7.50%) @ 25 year amortization 
  • Debenture: 6.35% @ 25 year amortization, the rate as of May 2024
Screenshot

STAR reports

As seen in the charts below the Occupancy in May has increased from 51.4% in 2022 to 71.10% in May 2024. The RevPar has increased from $28.55 in May 2022 to $41.04 in May 2024

The STAR reports shows the occupancy in April at xxx and which is xx% higher than the comp set. It is worth noticing that the comp set for this hotel consists of the following hotels: 

  • Best Western Plus Monahans Inn & Suites 
  • Comfort Inn & Suites Monahans
  • Candlewood Suites Monahans
  • La Quinta Inns & Suites Monahans
  • Microtel Inn & Suites Monahans 

 

Projections

The cashflow is calculated based on a 25 year amortization assuming the same rates indicated above at 7

Borrower Financials and Background

Borrowing Entity Structure

Guarantor Financials

Jiten Patel (20%)

Partner 2

END OF DOCUMENT