We are proud to disclose that given the current economic turmoil, we are a profitable organization (thanks to hard work behind the scenes) and we can therefore finance up to a 100 Million Dollars.
Well, let’s share with you a bit of results post the research our team at Al Razan conducted; while the doldrums of the current economic turmoil will be with us for the foreseeable future, the Hotel Industry has turned a corner. Revenue per available room is projected to increase this year due to higher occupancy, transactions are up and debt more available thus creating a smaller pool of lenders. Moreover; lenders want equity to remain in properties and hence borrowers need to be financially strong, with all sponsors willing to personally guarantee the loan.
1. Low leverage – we expect loan-to-value ratios to remain low as lenders continue to be selective with their underwriting. This will lead to a significant decline in supply growth in the short-term. If additional cash isn’t available to do this, borrowers will need to take on additional equity partners or work to convince their lenders to extend the terms on existing loans.
2. No cash out – Equity partners will need to be patient about getting money out of their Hospitality Investments. No longer can hotels be viewed as piggy banks. Owners need to get used to making money on the Performance of the Property rather than through its sale or refinance.
3. Strong borrower financials – borrowers will continue to need to have strong personal financials with ample liquidity and high net worth. Personal guarantees by all sponsors will remain a requirement. According to the career network survey, financial stability, good credit history, capital, access to equity and high net worth are critical borrower characteristics and ones we believe lenders will require in the future as well.
4. Higher interest rates – with still much economic volatility and declining hotel values, lenders will continue to require a premium on hotel investments. Projects with high cash equity; owners with hotel experience and a proven track record; a strong management team; risk strategies and policies; and a respected brand will have the best chance at securing competitive rates from the lenders.
5. Fewer lenders – there will continue to be a more limited number of banks and private lenders making hotel loans.
While these factors will continue to limit the availability of debt financing in the hospitality sector, we at Al Razan promise be different with an efficient way to deal with your finances.