Remington Capital – Brad Sweet

It was refreshing to read some good news this week in Michael Murray’s article for Mortgage Bankers newsletter regarding the hospitality sector. We’re in for a little better year in 2010.  Among the forecasts:

1. Global hotel transaction volume will increase by 20 percent to 40 percent, or up to nearly $4 billion by next year, said Jones Lang LaSalle Hotels, London.
2. In its Hotel Investment Outlook 2010 report, JLL Hotels forecast the first increase in transaction activity since 2007, following a 64 percent decline predicted for this year.
3. “Asian conglomerates are poised to emerge as one of the primary global acquisition groups in 2010 as they seek prime assets in gateway markets, especially in the United States and United Kingdom, playing to currency fluctuations,” de Haast of JLL Hotels said. “Furthermore, sovereign wealth funds, primarily from the Middle East but also Asia, will aim to place capital in hotels as a hedge against inflation, and will therefore become more active buyers again.”
4. The focus for investors, de Haast said, will be three or more months of consecutive year-over-year room yield growth as a sign of stabilization to “underpin valuations and boost confidence” as hotel recovery varies based on world geography.
5. “Savvy buyers who are in a strong cash position and can be aggressive will be able to benefit from the buying opportunities that emerge,” de Haast said. “Overall, bids will continue to be conservative in 2010, but the early movers stand to capture the most value.”

Read more here: http://www.mortgagebankers.org/tools/FullStory.aspx?ArticleId=9759#full

If you’d like to discuss how we can help arrange commercial financing in hospitality or other sectors, please contact me today. Thank you – Brad Sweet, Remington

Whatever type of mezzanine financing that may be needed, the professional advisory team at Remington has the know-how and experience to successfully structure any type of transaction and provide access to the best commercial financing available via its global network of private and public sources of capital.

Several types of mezzanine financing are available, including:

Mezzanine Loans: The most common type of mezzanine financing is straight debt. It is also the easiest to understand. With straight debt, the mezzanine lender is in a subordinate position, usually up to 85% LTV, with no equity participation in the cash flow and no management participation. Depending on the amount of leverage, the type of project, and owner history, yields will typically fall within the 9-13% range, with terms similar to the senior debt.

Participating Loans: If higher leverage is the objective, and borrowers are willing to give up some cash flow or equity for it, a hybrid form of participating debt instrument may be the way to go. With such debt, borrowers can usually boost LTV up to 90%, while lenders generally receive a slightly lower coupon rate on the note but may receive an exit fee when the property sells. Given the increased risk assumed by the lender from the amount of leverage involved, a higher overall yield is required from the combination of the coupon rate and the equity obtained in the transaction.

Preferred Equity: With preferred equity, the borrower and lender usually enter into a partnership or joint venture agreement. This typically results in the investor gaining some project control, a greater equity position, more risk and a greater return than that provided by a participating loan, and the ability to take over the project in case of default. The borrower, on the other hand, gives up some control in exchange for not having to commit substantial capital to the project.

Please call me at the office and let’s discuss.  Thank you, Brad Sweet – Remington