Walker & Dunlop arranged the $ 112-million refinancing of Ace Hotel Brooklyn( here) and $ 92 million to refinance the 466-key, tri-branded Hiltons at McCormick Place in Chicago( above).
HOTELS ARE OPERATIONALLY INTENSIVE AND SUBJECT TO SEASONALITY, DEMAND VOLATILITY AND CAPEX REQUIREMENTS. TRADITIONAL LENDERS STRUGGLE TO UNDERWRITE THESE RISKS
– JAY MORROW, SR. MANAGING DIRECTOR OF HOSPITALITY, WALKER & DUNLOP these funds have made to the software sector, where valuations have plunged in public markets on the threat of artificial intelligence. This is exacerbated by the illiquidity of private-credit loans that are not publicly traded on exchanges and often held to maturity of around five years. Investors in this space accept this lack of liquidity in exchange for an“ illiquidity premium,” which provides higher yields and returns compared to public, tradeable debt.
Does commercial real estate face a similar danger in the private-credit sphere? Not according to those who work squarely in it; in fact, they say, it will only get bigger.
“ Absolutely— you’ re seeing private credit play a bigger role,” said Leeny Oberg, now-retired CFO and EVP of development for Marriott International.
Private credit is one of a handful of debt instruments borrowers can turn to. It has key distinctions compared to traditional bank lending, including faster execution( private credit deals can close in 30 – 60 days) and broader flexibility in loan structuring. It’ s not the wild west, but, in short, private credit has the pluck to step in and fill gaps left by stricter bank regulations brought about by protection acts like Dodd-Frank and Basel III.
Private credit is not new, but found more opportunity, Oberg noted, in the past few years as the appetite by traditional banks to originate new loans became more restrained
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