FINfacts Newsletter XVII-28

National Lender Still Funding Hotel Loans for Strong Flags in Top Markets.  GSP has identified a nationwide lender still funding low leverage loans for hospitality properties in strong metropolitan markets. The capital provider is currently lending only to franchisors of top "flag" hotel brands in primary markets. Currently the lender is requiring the following to fund a transaction: 1). Owner/operator with demonstrated hotel ownership experience (minimum of two hotels for at least three years), 2). Excellent property location; visibility, accessibility and positive economic demand generators, 3). Meets all qualifications of franchisor. Transaction Size: Over $1M; Rate: 7.5% and up; Loan Term: 3 years; Amort: 20 years; Max LTV: 50%; Min DCR: 1.50; Geography: Primary MSAs.

Palatable Mezzanine Financing Available for Institutional Quality Commercial Assets Nationwide.  GSP has identified a source of attractively priced mezzanine financing for all asset classes of commercial real estate nationwide. Currently, the fund is looking to provide the much needed capital between the limited leverage availability in the marketplace (between 50% LTV - 70% LTV) at a rate of approximately 12%. Although there are other players in this arena, they are more expensive, typically pricing their loans between 15% - 22%. This lower pricing affords the borrower a lower blended rate that may make the difference in a deal penciling in the tight credit environment. The fund is currently focused on high quality assets (institutional quality) in top tier, high barrier to entry primary markets. The financing can be structured as typical mezzanine or preferred equity (under same mezzanine terms) if need be. Transaction Size: $5M - $25M; Rate: 12% -13% Fixed; Loan Term: 3 to 5 years; Max LTV: 70%; Geography: Large MSAs; Non-recourse.

Today, the Treasury announced the release of new tax rules that will facilitate the restructuring of CMBS loans for distressed property owners. The announcement is the first round of "additional guidance" that the Treasury is considering to prevent a crisis in commercial real estate. With over $150 billion dollars of CMBS loans maturing between now and 2012 and scant financing options available, the Treasury announcement was highly lauded by most in the real estate industry (who lobbied heavily for it). 

Until now, tax rules made it difficult for commercial real estate borrowers to restructure their existing loans unless the borrower was delinquent on their mortgage.  This is due to the fact that, when CMBS offerings are created, the underlying mortgages are held by tax-free trusts. According to the old CMBS accounting rules, these trusts could have been forced to pay taxes if the underlying loans were modified before delinquency. The new guidance from the Treasury permits discussions involving loan modifications to "occur at any time" without triggering any tax consequences.  In addition, the new rules allow servicers to modify loans regardless of their maturity date.   

The Treasury is considering "additional guidance" aimed at preventing future defaults as billions of dollars of commercial mortgages come due.  Case in point, the real estate industry has recently pushed for a new tax law that would encourage foreign investment in commercial real estate assets.  (Sean Lurry)