LENDING REPORT |
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THE FLEXIBILITY OF THE PRIVATE-LENDING PLATFORM CAN POSE A MEANINGFUL SOLUTION TO HOTEL OWNERS AND INVESTORS FACING DISTRESSED SITUATIONS |
– ALEX HORN, MANAGING
PARTNER AND FOUNDER,
BRIDGEINVEST
have either little to no cash flow and will provide up to 65 % leverage.( CMBS loans also have strict prepayment penalties designed to protect investors from losing interest income if a loan is paid off early. This convention discourages owners from selling an asset early.)“ They’ ve carved out a niche relative to the CMBS lenders relative to the bank lenders and relative to the life company lenders,” Davis said.“ Their pricing tends to be more expensive, but they’ re also offering loans on assets that
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frequently have a higher risk profile relative to the traditional risk profile of banks.”
In essence, it allows these debt funds to be much more entrepreneurial since they have flexibility in their risk profile about what they’ re willing to do and not do. One of these is Atlanta-based Access Point Financial, which has carved out a $ 3-billion space in the private-credit landscape and focuses exclusively on hospitality. Last August, it completed the refinancing of $ 1.1 billion of floating rate mortgage loans backed by 67 properties with ATLAS SP Partners. In January of last year, it provided $ 195 million refinancing for The Beekman, A Thompson Hotel in New York.
Direct lenders like Access Point fill a breach since their risk tolerance is typically higher than a traditional bank lender; it often means their money is more expensive. Consider a $ 10-million loan where a bank might provide up to 60 % leverage.“ But that requires some very real credit metrics,” said James Reivitis, chief development officer and managing director at Access Point Financial. War in Iran and its attendant ramifications have clouded the economic environment and when things get a little bumpy, traditional banks may reconsider its credit box.“ If they pull back, somebody like us would say,‘ I still think we’ re good at 65 cents on the dollar,’” Reivitis said.
It doesn’ t mean banks are totally out of the game. Many
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non-bank lenders tap banks to fulfill private-credit lending through what is knows as“ back leverage,” a financing method where a lender, often a privatecredit fund, borrows money from a third-party bank, using their existing portfolio of loans as collateral. This strategy allows funds to increase their lending capacity and improve investor returns. It also allows banks to put money to work without the mechanics of managing the loan and dealing directly with the borrower.
This symbiosis allows deal structures to benefit the bank and private-credit lender. In a typical example, privatecredit loans are SOFR-based, floating-rate, five-year loans. In this scenario, a bank provides a credit facility that the fund will price at SOFR-plus a certain spread above what the bank priced the debt— maybe 200 basis points.“ If my back leverage is charging me SOFR plus 300, I’ m going to try to go out and charge a lender SOFR plus 500. I’ m making a 200-basis-point spread on the loan, but I’ m also dealing with servicing it,” Reivitis said. Accordingly, should the loan go upside down, Access Point, in this example, is on the hook.“ If they miss a payment, I still owe a payment,” he said.
As Reivitis put it, private credit acts ostensibly like mezzanine debt, where, in an alternative scenario, a borrower might have two loans to pay back— one to the bank and one to the alternative lender. Now, it’ s one product, one loan.
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INSTEAD OF HAVING TO DEAL WITH A BANK AND A MEZZ LENDER, THEY’ RE JUST DEALING WITH US
– JAMES REIVITIS, CDO AND MD,
ACCESS POINT FINANCIAL
“ Instead of having to deal with a bank and a mezz lender, they’ re just dealing with us,” he said.
It’ s not easy being private credit right now. A Morningstar piece called it“ crunch time” for private credit. There is a distinction, however: commercial real estate private credit is a separate part of the broader private-credit market. Cracks in the latter don’ t necessarily correlate to any distress in private credit earmarked for hotels.
Brian Klinksiek, global head of research for LaSalle Investment Management, recently said that the collateral behind real estate private credit is so different. It’ s that distinction that keeps it going unabated.
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24 hotelsmag. com May / June 2026 |