activity to be tempered with caution , although even in challenging times the brands may vigorously enforce scheduled property improvements . Many completed projects most likely will feature mixed-use components ; and look for brand conversions to create new value for well-positioned properties .
On the other hand , conversion of older or distressed assets to other uses , including in mature suburban markets , will help relieve capacity issues in some markets .
H : Was is the expected level of CMBS distress ? Broad : CoStar ( in November ) reported US $ 6.8 billion in CMBS maturities over the remainder of 2022 and an additional US $ 15.3 billion on deck in 2023 . A large portion of those loans are probably going to be renegotiated . Unless the hotels have grown revenues enough to keep up with the rise in interest rates , their new decreased coverage ratio will limit proceeds on a new loan and the borrower ’ s ability to pay back the maturing loan .
H : Will debt availability improve or worsen in the near term ? Hecker : Banks have money to lend , and higher interest rates create opportunities for improving margins / spreads . So , I think we ’ re going to see improving debt availability for the hotel sector . Human : That is the big unknown . The market is already pricing in substantial rate increases , so it is more about availability than cost moving forward . This really all comes down to the extent to which trading becomes affected by the current inflationary pressures and turmoil in the capital markets ( i . e . whether or not economies do sink into general economic recession ). Right now , trading remains robust , but there is little visibility and lead times are short . If countries do fall into recession , the availability of debt from traditional lenders is more likely to shrink than recover . Petiz : Debt availability is likely to be tighter going forward as lenders will be more careful about leverage ratios offered in their borrowers ’ business plans . Despite a relatively large pool of liquidity right now at banks and debt funds , we do not believe that lenders will lend ‘ for the sake of lending ’ and will be prudent allocators of capital assessing transactions on the basis of ( i ) who is the borrower ; ( ii ) who is the target ; and ( iii ) what is the business plan . Meikleham : Unfortunately , it ’ s very hard to obtain an acquisition loan or construction loan right now . If they ’ re available , it ’ s expensive and only getting worse . Broad : The cost and availability of debt will continue to be an issue for the next 12-18 months .
H : Will there be an increase in nontraditional debt sources , and what will it look like ? Hecker : With the liquidity in the market and rising interest rates , private equity can potentially be put to use for alternative lending , mezz financing . There ’ s also increasing “ green ” lending and the hotel sector has plenty of opportunities for “ green ” improvements and carbon emission reduction . Human : The debt funds will step in to take advantage . We may see some of the considerable amounts of drypowder equity looking at lending .
RIGHT NOW , TRADING REMAINS ROBUST , BUT THERE IS LITTLE VISIBILITY AND LEAD TIMES ARE SHORT . IF COUNTRIES DO FALL INTO RECESSION , THE AVAILABILITY OF DEBT FROM TRADITIONAL LENDERS IS MORE LIKELY TO SHRINK THAN RECOVER .
– CHARLES HUMAN
Petiz : Absolutely . Already we are seeing several new players becoming sources of nontraditional debt ( or quasi-debt ) capital , including preferred equity , convertible as well as sale and leaseback capital . Although these forms of financing have been available before , there is a new breed of investors with deep
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