Leisure Real Estate Blog

News & Updates from LREA

Wednesday, October 3 2012 7:13 AM
Categorized In News & Updates

If you have not been receiving our “updates“, go to our website and register.  It is easy and all we need is your name and email address.  (We will never sell or provide your data to others).   We know everyone is inundated with information, so our “update” newletters are brief and to the point.  That is, we provide information on new listings, price reductions and other changes.  On occassion, you might see a brief comment or a link to an article that we think is helpful to its readers.   The updates are one of the best ways to keep track of our inventory of hotels.

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New rates posted for the SBA 504 program

Monday, September 17 2012 8:31 AM
Categorized In Real Estate

4.28% is the most recent 20 year rate for the SBA 504 program. As most of you know, this rate is fixed for 20 years, if held to full term.

Based on the nature of these debenture loans, the published offered rate changes monthly. However, it is safe to say that the fixed nature of the rate, once established, could not be found from a traditional lender.

The 504 program gets somewhat of a bad rap, because of the detailed paperwork required for application, but in many instances, it is one of the few ways to get a lender to participate in a hotel loan. If you are considering hotel acquisitions, a 504 loan might be in your future.

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SUPER 8 – Oskaloosa, IA Shows Increases in 2011 Revenue & NOI!

Tuesday, February 28 2012 3:06 PM
Categorized In Property Updates

2011 RR – $432,300

2011 NOI – $153,000

49 Units, 2-Story, Interior Corridor, Absentee Owned

Bank/SBA Financing with 20% down payment

View Property Details

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PRICE REDUCTION – Budget Inn & Suites; Des Moines, IA

Tuesday, February 28 2012 9:36 AM
Categorized In Property Updates
Price Reduced to $1.9M
2011 Total Revenue of $690,000
2011 NOI of $190,200

Owner Financing Available with 15% down for qualified candidates

Run as an Independent or Howard Johnson flag available

View Property Details Here

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SBA opens new doors

Thursday, October 28 2010 3:45 PM
Categorized In Real Estate

Most of us in the hotel bidness have heard or read about the new SBA 504 and 7 (a) enhancements passed recently in HR 5297.   The highlights of the bill increased the maximums under the SBA 504 and 7 (a) loans to $5 million.  In the case of the 504, the $5M maximum (for hotels) could translate into a total deal size of $12M.  For example, using the 504 program, 40% of the deal would come from the SBA debenture, 40% from the primary lender and 20% from the investor.   (Currently, we are seeing most 504 lenders require 20% down for hotel deals).  In some instances, you may find a lender willing require less than 20% by using the 7(a) program, but it would depend on the lender, and would be unusual.   One very important point that has been overlooked is the fact that the increased limits for 504 will reopen the door for those investors who are at their $1.5 to $2M dollar limits.  In other words, if you now have an SBA loan and your SBA portion is at or near $2M, you now will have another $3M of eligiblity with the 504 program. 

In addition to the above, the fees for both programs have been reduced or eliminated until the end of 2010.    Many folks we talk to do not like the brain damage it takes to work with the SBA.  But in today’s lending environment, use of the SBA may be the only way to purchase a hotel.  In addition, the SBA requirements are similar to those found with a traditional loan.  Besides, if you use a CDC (Community Development Corporation) that knows what they are doing for hotels and the 504 portion, the application process is simply a matter of following the steps, just like any other loan.  Another “bang for your buck” feature is the interest rates on the 504 debenture, which are as low as I have seen them in 20 years.  Anytime one can get an interest rate, fixed for 20 years, at less than 5% APR, it creates an opportunity. 

Based on the state of the market and the new higher limits for these loans, I would be looking for opportunities to buy.   If you have seen anything different in the lending marketplace, I would love to hear about it..

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Good News!!! Development pipeline has slowed.

Tuesday, September 14 2010 9:39 AM
Categorized In Industry News

According in todays issue of Hotel News Now, STR/TRW/ Dodge is reporting a year over year decline of 24.2% in hotel construction starts. Every bit of positive news is helpful in today’s hospitality environment. I told one of my best owner clients to remain positive and he said he was……he said, “I am positive that my business is in the crapper!!!” Although his comment was made in fun (somewhat), we are seeing definite signs of life. Our activity is up considerably over the first half of 2010. We are seeing stabilizing revenues and some pockets of improvement. Of course, we are still facing the problem of the gap between a buyer’s willingness to pay and a seller’s expectations, but that issue will always be present……it is just a little deeper than normal, as caution is deeply imbedded into each buyer’s psyche.
Having a lid on new development will certainly curb new competition, as the hospitality industry seems to always eat its own with new development. We have always emerged from previous downturns……..and the weakness of the development pipeline will certainly help the recovery process.

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STR forecast somewhat encouraging

Wednesday, September 1 2010 7:35 AM
Categorized In Industry News

Smith Travel Research, through its on-line daily e-news publication Hotel News Now, released its projections for year end 2010, with two of the three major indicators predicted to increase.  Year over year occupancy and RevPar are both expected to increase by approximately 4.3%, while ADR is projected to remain flat.  In our brokerage practice, I would concur with the STR projections, as our group is seeing increases in occupancy and RevPar.  Increase in ADR has been more resistant, though.  One possible reason is that owners have made an effort to resist lowering their rates during the recession and therefore, the rebound in rates will be somewhat less dramatic.  Also, the owners have been more interested in building occupancy and, therefore, rate management will depend on their ability to build occupancy.   Not many owners want push rates until the recovery is more consistent. 

Although the STR predictions are good news, they are just predictions.  The recovery holds the key to the fundamentals of the hotel business and time will tell.  I am hopeful that they are right and we actually surpass their projections.  With that said, I hope everyone has a great Labor Day weekend.

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Historically low rates for SBA 504

Friday, August 13 2010 9:54 AM
Categorized In Industry News

Check this out!!  The SBA posted its August rates for the 504 program and the effective rate is lowest it has been in 20 years.  The 4.93% is the effective rate, which means the fees are included in the rate calculation.  For those unfamiliar with the 504 program, the 4.93% is a fixed rate for 20 years.  As most of us in the business know, this is an extremely low rate, especially hotel loans.  40 to 50% of the loan package will be the SBA portion…..the rest is funded by a tradional bank, with the borrower providing  the balance is equity.  These loans require some extra paper work and fees, but they are certainly worth considering, especially when one considers that a traditional non-SBA loan for a hotel deal will often require upto 40% down.

If you are looking to purchase a hotel and you satisfy the SBA requirements, you will not find a better 20 year fixed rate.  What do you think?

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Leisure Real Estate Advisors has launched into the Blogosphere

Saturday, July 31 2010 7:21 AM
Categorized In General Comments

Napoleon Hill, an American author, once said, “Don’t wait, the time will never be quite right”.  And so it is with Leisure Real Estate Advisors and network media.   I must admit, I have resisted for quite awhile, but we have finally taken the plunge into the blogosphere.  As a result, welcome to my 1st post.  At Leisure Real Estate Advisors, we have always tried to stay on the cutting edge of technology, especially as it pertains our web based marketing campaigns.  However, it has become evident we can also distribute industry information, changes in our listing portfolio and our opinions of the market through the posting of blogs.  More importantly, we will learn from your comments and will provide us, and our readers, valuable insight to a variety of hospitality topics (and a few other things, too, I suppose!!).

A COMMENT ON THE STATE OF THE INVESTMENT MARKET

Like nearly every business in the country, (except the federal government and its startling growth), the hospitality business has been a bit of a struggle.  Over the last 18 months, occupancy, ADR’s and RevPar have all dropped and in some instances by 25% or more.  In the central US, we haven’t been hit as hard as the coasts, but the effects have still been felt.   With regards to the buying and selling of hotels, and as it relates to the recession, the drop in revenue has caused profitable hotels to become break-even or worse.   Most of us would agree that such a property would be distressed.  (I know investors think so!!)   In order to sell a hotel in financial distress, a seller needs to be very motivated to sell.  That is to say, without cash flow sufficient to meet debt service, the market considers your hotel to be in distress, no matter how new and pretty you are.  Secondly, without cash flow, the seller will need a buyer with the financial capability to purchase the property on his/ her own financial strength, without the strength of cash flow.  Everyone knows these folks (buyers) are around, but they will not pay a premium for upside they will create nor from operations they will improve.    Those deals are getting done through motivated sellers and very qualified buyers.  If, on the other hand, your hotel shows appropriate cash flow for the price point, it will appeal to the marketplace.    It isn’t rocket science…..the cash flow will provide the best opportunity to gain financing for the transaction, through conventional methods or through government programs such as SBA or USDA.

In spite of the recession and investor caution, our activity has remained strong.   Buyers and sellers still differ on opinions of value, (which is certainly not a new phenomenon), but the gap is narrowing.   Sellers are realizing investors will not purchase based on pre-recession revenues and prices.  And, it could be years before the basic fundamentals improve to those levels again.   I have been through three major investment cycles since the mid 1980′s,  so this cycle was not unexpected.  However, the severity and depth of the cycle was unexpected.  We are seeing signs of improvement in the basic fundamentals of the hotel businees, but it could take some time to get back to 2007 levels.  As for me, I have always held there is a deal to be made on every property, sooner or later……….one just has to find it.

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