INVESTMENT
looking to keep extending in certain instances ... CMBS has been shut down , which is a nice avenue for debt . You had senior lenders step into the place where more traditional banks were lagging , and debt funds came . But with debt funds , they have had backed leverage . So , this past summer with the back leverage gone , there really has been a missing financing angle and for those that really need it and are willing to pay a little bit more , we can step in and fill a very nice gap .
It ’ s something that we ’ ve wanted to do for a long time given our financial and credit background … It ’ s been a pain point for us on the buying side . We know there ’ s a gap on the mezz side .
For the borrowers and banks that needed that security blanket ,
THIS SUMMER , EVERYBODY PUT THEIR PLANS ON PAUSE AND WE SAW PRICING HIT 10 % TO 15 % FROM EXPECTATIONS . SO , I THINK THERE ’ S A RESET ON EXPECTATION AND A LOT OF UNCERTAINTY AROUND HOW MUCH AND HOW QUICKLY CORPORATE BUSINESS IS GOING TO RECOVER … WE HAD A LOT OF DEALS THAT WERE TALKED ABOUT SOFTLY . I THINK WE ’ LL START TO SEE SOME THINGS MOVE . THEN THERE ’ S GOING TO BE A LOT OF PRESSURE FOR THE YEAR END BECAUSE OF MATURITIES .
– CARLOS RODRIGUEZ , JR .
especially with us having the operation arm , we ’ ve created a true leg up … We ’ re not looking to own these things , but we feel very confident in stepping in .
H : Is it strictly a mezzanine debt fund ? CR : It ’ s currently mezz . We don ’ t have a restriction , per se , with the fund . It ’ s just from the return parameters , etcetera , and the size of our fund , we ’ re looking to partner , source the entire deal , and then lay off the senior components . But we are also doing deals where the senior lender brings us in .
H : What is the makeup of the borrowers you are seeing ? CR : Our focus is on quality sponsorship and experience . In every single loan , except for one , the players are either developers or owner-operators buying hotels . We ’ ve done well in securing that . There ’ s just such a demand right now for debt to go up to a certain leverage point , even as high as 65 % to 70 %... And we ’ re coming in at very attractive rates to us by partnering with a senior who may feel comfortable up to 40 % at an attractive rate given the institutional profile of these deals and newer builds and quality sponsors .
H : Is your deal flow sector specific ? CR : We had a few more selectservice … The profile would be anything that we would feel comfortable managing . We ’ re not in the economy segment , but with that size of a portfolio , we felt comfortable that in the worst-case scenarios Driftwood could come in and manage . It just comes down to the size of the mezz required and making sure that we can accommodate a bigger loan .
H : What does your lending pipeline look like right now ? CR : This summer , everybody put their plans on pause and we saw pricing hit 10 % to 15 % from expectations . So , I think there ’ s a reset on expectation and a lot of uncertainty around how much and how quickly corporate business is going to recover … We had a lot of deals that were talked about softly . I think we ’ ll start to see some things move . Then there ’ s going to be a lot of pressure for the year-end because of maturities .
H : Is lending a longer-term play for Driftwood ? CR : Absolutely . We are very excited
52 hotelsmag . com Nov / Dec 2022