McLean-based db Capital Ventures Formed to Provide Hotel Debt
db Capital Ventures, a new hotel finance company headquartered in McLean, VA, will provide hoteliers with a full-range of loans, from CMBS to construction loans with financing up to 80 percent loan to value. The company will be led by hotel finance veteran Chris Clark, principal and founder.
Clark, with some 20 years of hospitality lending experience, began his hotel lending career with Lexington Mortgage Company, which along with Lehman Brothers created the first CMBS Hospitality loans. Lexington became the Hospitality Lending Group for GMAC Commercial Mortgage Company before being acquired by KKR and Goldman Sachs Partners and renamed Capmark Financial, Inc.
db Capital Ventures will provide a broad range of loans, including CMBS conforming, CMBS/mezzanine combinations, non-CMBS conforming loans, non-CMBS high leverage loans. In addition, debt is available for construction loans for experienced developers who plan to build under premium brands.
Clark outlined debt availability and terms based on current market conditions:
· Conventional CMBS loans will provide debt at 65 to 70 percent loan to value. These loans currently will be priced in a range from the low to mid-4 percent range up to low 5 percent.
· Higher leveraged loans also are available, up to 80 percent loan to value. The capital stack will be funded from the lender’s balance sheet. The senior portion typically will be syndicated and the remainder kept on the originator’s balance sheet. The all-in blended rate currently is in the low 5 percent up to the 8 percent range.
· Terms for conventional and higher leverage loans will be five, seven, or 10 years, depending on the hotel and other factors.
“CMBS has returned meaningfully to the market in the past six months. However, the structure of these loans has changed into what we call CMBS 2.0,” Clark said. “The primary differences include more conservative underwriting, enhanced transparency, risk retention by originators and important structural improvements to the management and decision making of the CMBS pool.”
Clark noted that lenders today are looking for hotels with upside potential that have strong brands and experienced owner/operators.
“RevPAR for U.S. hotels in most segments has improved for nine straight quarters. Despite this improvement, RevPAR remains below its 2008 baseline by some 5 percent, according to Moody’s Analytics. Forecasters estimate that RevPAR should reach the 2007 peak during 2013/2014 and then enjoy positive lift for at least several more years,” he said. “Many of the loans made at the peak of the last cycle—2005 to 2007—are now coming due. Experts estimate that approximately $44 billion in hotel CMBS loans will mature by 2017."
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