As funding slowly returns for hotel properties, lenders should be more cautious when underwriting hotels as collateral for loans. Unlike other types of commercial real estate properties such as retail, office or multifamily properties, hotels are prone to extreme fluctuations in revenue and operating expenses. Lenders should keep this in mind when originating loans involving hotel properties as collateral, and address business issues and other potential pitfalls unique to this type of asset.
In a recent article in the Scotsman Guide, I address five problem areas – personal property, franchise agreements, renovations, comfort letters, and liquor licenses - that will likely be addressed by lenders at loan origination to protect the value of the collateral in a default situation. Having successfully represented a number of owners and lenders of hotels, we can attest that while hotels can be tricky collateral, an experienced legal team that understands the complexities of hotel lending can help minimize risk and avoid the pitfalls.
To read the full article, please click here.