Hospitality and special-use financing
Hotels, self storage, mobile home and RV parks, car washes, healthcare and senior living, and the other assets most banks decline before they finish reading the address. These are operating businesses wearing real estate, and they need lenders who underwrite them that way.
Who this is for
Owner-operators and investors in assets where the real estate and the business are the same thing. Hotel owners, storage operators, park owners, car wash operators, and healthcare and senior living sponsors.
What changes in the underwriting
Everywhere else on this site, a lender underwrites a rent roll. Here they underwrite an operation. That means historical performance carries more weight, projections carry less, and the operator’s track record is a primary credit factor rather than a supporting one. Expect a feasibility study on new construction, a franchise or management agreement review where one applies, and coverage requirements a full 10 to 25 basis points of DSCR above what a stabilized apartment building would face.
Expect also that leverage will be lower, and that this is not negotiable by argument. The way to move the number is a stronger operator, a longer history, more reserves, or a better-structured management agreement, not a better-worded email.
What we need to quote
- Three years of operating history, and trailing twelve months
- Hotels: STR report, franchise agreement, and any PIP
- Storage: unit mix, rate per square foot, occupancy trend, competition
- Parks: site plan, lot count, tenant-owned versus park-owned homes, utilities
- Management agreement and the operator’s portfolio
- Sponsor financial statement, liquidity and experience in this asset class
Specialty asset questions
Why are these harder to finance?
Because the value is inseparable from the operation. A vacant apartment building is still an apartment building. A hotel with nobody running it is an empty box with plumbing, and a car wash without a customer base is a very expensive equipment shed. Lenders price that operational risk with lower leverage, higher coverage requirements and more scrutiny of the operator, which is the right response, not an unreasonable one.
What does a lender look for on a hotel?
Flag and franchise agreement term, STR report performance against the competitive set, occupancy, average daily rate and RevPAR index, the property improvement plan and who is funding it, management company quality, and the sponsor’s hotel track record. A franchise agreement expiring inside the loan term is a serious issue, and PIP funding is the item borrowers most often forget to size for.
Self storage, what makes a good file?
Physical and economic occupancy with a trailing history, unit mix and rate per square foot against local competition, climate-controlled share, whether it is managed by a recognizable operator, and the supply pipeline in the trade area. Storage has financed well for years, which also means new supply is the main risk lenders underwrite. A rate-per-square-foot trend beats a single occupancy number.
Do you finance mobile home and RV parks?
Yes. Agency programs exist for qualifying manufactured-housing communities and can be very attractive, but they have real conditions: paved roads, a minimum share of tenant-owned homes, utility infrastructure standards, limits on park-owned homes. Parks that do not qualify go bank, credit union or debt fund. Private utilities and master-metered water are the two items that most often need explaining.
Can you finance ground up on these asset types?
Yes, at lower leverage and with more sponsor experience required. Construction plus operating risk stacked together is exactly what special-purpose lenders are cautious about. SBA 504 works well for an owner-operator building their own facility, and debt funds handle larger institutional projects. Either way, the file lives or dies on the feasibility study.
What about car washes?
SBA is usually the answer for an owner-operator, and it is a specialty within a specialty: equipment value, site throughput, membership base, competition inside the trade area and site visibility all matter. Special-purpose treatment means a 15% injection rather than 10%. It is a financeable asset class with the right lender, and a wasted sixty days with the wrong one.
Every deal gets a real answer
Tell us the property, the plan and the number you need. A credit officer reads it and tells you what it will support.
- Texas hard money. A term sheet from the people who fund the loan.
- Commercial, all 50 states. Quotes from the desks that cover your asset.
- Outside the box? A straight reason, and usually a name that does fund it.