Holiday Inn Hotel & Suites

Location: Beaumont, Texas

Size: $10,000,000

Challenge: Underwriting

Type: Permanent Loan

This property had been acquired from a distressed seller and needed a massive PIP. The historical financials reflected operating margins of under 10%. Our client decided to utilize a 3rd party management company, so ownership could focus on the renovation. After a year of continued lackluster performance, an affiliate of the ownership took over management of the hotel, right as the PIP was starting. They immediately eliminated numerous bloated expenses and began posting stronger operating margins. We were hired to replace an existing recourse loan when there was only 6 months of good performance and significant revenue displacement from the PIP. Despite all of these challenges, we closed a 10 year fixed rate loan with a lender that provided 85% of cost proceeds by using an 11% debt yield on a purely underwritten and non-historical NOI.