Ester Hertzfeld with Hotel Management Magazine spoke with Peachtree SVP Jared Schlosser about the hotel lending market in her most recent article.
https://www.hotelmanagement.net/financing/us-hotel-lending-likely-get-more-challenging
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Investing in a franchise hotel can be a good way to diversify your portfolio and to achieve solid returns over an extended period of time. Finding the right hotel financing options can make this acquisition even more profitable. Comfort letters are designed to provide a legal framework for lenders and franchisors to handle situations in which the hotel purchaser defaults on the loan. Here are some facts ever investor should know about comfort letters.
What are Comfort Letters?
Comfort letters are documents that allow lenders to assume franchise rights if the original franchisee defaults on the loan. These letters include provisions that ensure that lenders can continue to operate the hotel in the event of default or foreclosure on franchise hotel loans.
Benefits of Comfort Letters
Comfort letters offer several benefits for all parties involved in the transaction, including the following:
- Borrowers are more likely to find the most attractive hotel lending arrangements if the lenders have greater certainty that they will be able to recoup their investment even if the borrower defaults. This can improve the terms of these loans and can make it easier to obtain the financing needed to acquire franchise properties.
- Lenders can more effectively collateralize their loans by ensuring the ability to maintain the profitability of the properties they finance.
- Franchise companies can protect their brand name by continuing operations and maintain a presence even when franchisees fail to meet their financial obligations and go into default on their hotel loans.
Many lenders require comfort letters before they will finalize loans for franchise hotel properties.
Crafted by the Franchise Company
In most cases, the comfort letter is drawn up by the franchise company as part of the franchising process. These legal documents may follow a standardized template or may be customized to suit the needs of the borrower and the lender. The contents of the letter may include some or all of the following provisions:
- A provision that ensures the ability of the lender to appoint a receiver to operate the hotel for a short period of time during foreclosure proceedings.
- A clause that allows the lender to cure any default of the franchise agreement before it is terminated.
- A provision that allows for the resale of the property and the transfer of the franchise agreement to a third party if the hotel goes into default.
These provisions are designed to protect the lender if the hotel financing loan goes into default.
About Peachtree Group
Peachtree Group is a direct lender with a specialty in hospitality lending. Our originators work with investors across the US to provide the most practical hotel financing arrangements for their specific needs. Contact us today to discuss your financial needs with one of our expert loan originators. We work with you to provide the best options for your hotel financing requirements.
Peachtree Group Provides $34.5 Million Loan for Acquisition and Renovation of 312-unit Multifamily Property in Florida
ATLANTA (Feb. 2, 2024) – Peachtree Group announced the company originated a $34.5 million loan for the acquisition and renovation of a 312-unit multifamily property in Gainesville, Fla., on behalf of Coastline Management Groups (Coastline), a Hollywood, Fla. based service-oriented real estate management company. The property, Pavilion on 62nd, is a 25-building, 312-unit multifamily used previously for student housing.
The Peachtree Group team originated the floating-rate bridge loan over a three-year term, representing 61% of the stabilized appraised value.
The multifamily property contains 31.74 acres and features two-, three- and four-bedroom units with onsite property management, two clubhouses, two swimming pools, workstation cubicles, a game room, a media room, rentable event room, a gym, indoor racquetball and half-court basketball, sand volleyball court, dog park and package receiving center.
Coastline will use approximately $5.0 million of the bridge loan proceeds to renovate unit interiors, convert four-bedroom units to three-bedroom units, expand the onsite amenities and complete deferred maintenance on exterior and common areas.
About Peachtree Group
Peachtree Group is an investment firm driving growth with a diverse portfolio of commercial real estate assets and other ventures. We’ve executed hundreds of investments since inception with a focus on real estate acquisition, development, and lending. Today, we manage billions in equity, augmented by services designed to protect, support, and grow our investments.
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Peachtree Closes 14 loans totaling more than $261MM in the last 90 days
Peachtree Group Closed 14 loans totaling more than $261MM in the last 90 days
Peachtree Group is a nationwide direct balance-sheet lender, offering competitive terms, in-house loan servicing, and flexible capital to handle a wide array of projects.
Peachtree provides full-stack debt capital solutions to qualified commercial real estate owners across all sectors throughout the U.S. We offer bridge, construction, mezzanine, preferred equity, CPACE, permanent and NNN financing.
See below for some of the most recent loan transactions from Peachtree Group including hotel loans, retail, multifamily, industrial, and land. Click here for our portfolio.
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Need Financing? Contact us at lending@peachtreegroup.com.
FEATURED: Peachtree Closes $40MM in CPACE Financing in 23 Days
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Amid ongoing credit market dislocations, Peachtree Group originated a $40 million retroactive CPACE loan in just 23 days.
Read the Press Release.
FEATURED: $20.5MM Development Loan for a Conversion
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Peachtree Group worked with the Sponsor to convert a retail store to an industrial building in a sought-after area of Sacramento, CA.
Read the Case Study.
FEATURED: $12.5MM Bridge Loan for a Hotel
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Peachtree Group worked with the Sponsor to pay off its maturing loan while executing a business plan to upgrade its property to better compete in the marketplace and retain its Hilton flag.
Read the Case Study.
Peachtree is an award-winning hotel lender. Contact us to discuss your deal.