transaction activity has slowed dramatically is because of the rise in interest rates ,” said Dan Lesser , CEO of LW Hospitality Advisors . “ If it goes that way , it ’ s definitely going to loosen things up .”
Michael Sonnabend , managing member and co-founder of PMZ Realty Capital , which originates loans , is equally confident that any cut back in rate would benefit the hotel transactions market , which up to now hasn ’ t been electric by any stretch . “ It would make transactions a little bit
easier to come by ,” he said . Sonnabend said the idea of a rate drop had an equally important effect ; should they drop , people will think there are more to come . “ Because there are many doing floating rate deals , even if interest rates
IF ANYTHING , IT ’ S GOING TO CERTAINLY SPUR MORE ACTIVITY BECAUSE PART OF THE REASON WHY TRANSACTION ACTIVITY HAS SLOWED DRAMATICALLY IS BECAUSE OF THE RISE IN INTEREST RATES
– DAN LESSER , CEO , LW HOSPITALITY ADVISORS are lowered slightly , people always think they ’ re going to be lowered more ,” he said .
Lowering interest rates allows cash flow to work better on covering debt service and can potentially obviate the need for rate caps , which pile onto transaction costs . A rate cap is essentially an insurance policy that a borrower buys that protects them against undesirable movements in a floating interest rate .
Though hotel transaction volumes are down , Lesser said that there remains a surfeit of capital available on both the debt and equity side . One thing he has witnessed in the past couple of weeks , he said , is a narrowing of the spread between the base rate and the actual lending rate . “ If interest rates were to come down , you would see spreads come down as well . It ’ s nothing but positives for transaction activity .”
Ankur Shah , CFO of Access Point Financial , a direct lender , doesn ’ t believe interest rates will ever get back to 2019 levels and that the market has become comfortable that there will be no further rate increases but
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