All hotels will have to go through the real estate improvement plans sooner or later, and many properties will change the flags during the lifespan of a building. However, securing funds to support renovation or conversion can be a completely different challenge than financing a soil development.
From large resorts to Boutique Urban Hotels you will find four stories about renovation work and conversions and how your owners have secured the financing for the projects.
Saddlebrook Resort, Tampa, Fla
In cooperation with AMZAK Capital Management, Mast Capital received a loan of $ 72.5 million from Beach Point Capital Management to finance the renovation of the 480 hectare Saddlebook resort in Tampa. “We contacted the lenders to initiate the process in this instance in which we worked with JLL as a consultant,” said Jordan Korb, Choachberg, Choachberg at Mast Capital. “In view of the complexity of the deal, it was important to have well -organized, thoughtful materials that outlined the opportunity and distilled them for potential lenders.” The team also spent “significant time” to educate interested lenders to help them “to deal with the business plan and the various value components to“ deal with poor ”, Kornberg recalled.
In order to determine the budget for the Saddlebrook resort, Mast and AMZAK started with the business plan for which capital the resort. “After developing the business plan, we created a budget and worked through the design process,” said Kornberg. “As we designed, some of our focus areas have developed and there was a pressure and a train to decide how much money should spend in every area.” Ultimately, the parties developed a plan from which they believed that they would “optimize the business and the return of our investment and complete the budget accordingly”.
Loans for significant renovation work are “a bit of a gap on the market,” said Kornberg, since the lenders often cannot rely on debt yield, but also no pure construction loans. “
Maupon puppy – Kona – Kona Beach, Hawaii
The former Kona Bay Hotel on the island of Hawaii (formerly known as Hawaiis Big Island) is enforced with a planned reopening in summer as Hampton Inn Kailua-Kona Hotel. The owner Sandy Shapery will invest around $ 30 million in the renovation of the hotel in cooperation with Carlsbad, California, in the renovation of Summit Capital through his Entity 12th & a Hotel Partners.
Shapery worked with Summit to acquire the property in early 2020. “We came as a stock investor,” said John Stueber, President of Summit Capital. As soon as the deal was closed, the partners discussed how the asset was to be renamed. “We thought that this could do a unique Hampton Inn.”
The Hampton Inn Kailua-Kona Bay Hotel will open in Hawaii this summer. (The Hampton Inn Kailua-Kona Bay Hotel)
Brands such as Hamptons are “usually to the bottom that New Build Construction”, but the partner-together with Hilton-Fanden “one way” to get the approval for a conversion, and the first hurdle was cleared. The next hurdle was to determine a budget and a stack of capital that became all the more difficult through the location of the resort on an island and the need to import many furniture, devices and equipment from the mainland. “It was quite a process to get into a phase in which we would understand what the overall project costs would be,” said Stueber. “In this special case, since it was an all-equity transaction in the end, there was initially considerable equity in this project.”
The property is located in an opportunity zone, an instrument of economic development with which people in the United States can invest in “needy areas”. With this she had unique capital pursued, said Stueber. “We had a number of conventional banks that had completed offers for this, and we came to a point where we can choose a lender to go forward.”
Stueber noted that the conversion of an independent hotel can contribute to opening proverbial doors for financing. “That is no question [having a] Brand properties like a Hampton Inn at this place have certainly made the project much more financiallyable, ”he said. “The pool of the construction groups is certainly larger in contrast to an independent as a brand property [one]. “”
The inn near Celebration, Fla.
The in Chattanooga, Tenn. Local hotel developer and operator Vision Hospitality Group recently completed a renovation of the Inn at Celebration, Florida, and added Marriott's autograph collection.
“We have secured the funds [PIP] With the lender with whom we financed ourselves to buy the hotel, ”said Joel Wineman, Vice President of Asset Management at Vision Hospitality Group. “Special reserve accounts are maintained for every operating hotel to finance future capital improvements. In the past, these reserve funds were used for this purpose in most of our real estate. “
When financing or refinancing a property, the wineman continues, the time and the costs for planned PIP are included in the financial analysis to ensure that adequate financing is ensured. “We prioritize discussions with the existing lender before we include brokers or specialize [capital expenditure] Lender because these options usually include higher debt costs. “The PIP promotes most of the budget for rebranding exercise, he added, but the vision team also consulted third-party experts in order to prioritize the expenditure for building systems that the PIP did not take into account.
During the renovation and rebranding, the various parties kept in contact with monthly update calls to update the schedule and the budget progress. “The lender had his own inspection team to check the progress when we submitted a tie for the reimbursement of the project,” said Wineman. “We work closely with the finance team to establish and negotiate the drawing process, including specific dollar threshold values for conditional and unconditional lien.”
Voco the Darwin, Atlanta
The IHG brand made its debut in Atlanta at the end of 2024 when the former Ponce Hotel reopened as Voco The Darwin after a renovation and rebranding of 19.6 million.
“The financial decision for a renovation or rebranding project is primarily driven by the owner group,” said owner Shyam Patel from Global SCR. “The owners must evaluate their available capital and determine whether additional debts are required.” At the same time, according to Patel, the owners also have to work together with project managers, general entrepreneurs, designers and brand representatives in order to assess the financial effects of the renovation. “A major consideration is whether the expected increase in income justifies the costs of the renovation and the associated debts. This process requires a careful balance between investments and expected return. “Patel said that Darwin's third operator, Hospitality Ventures Management Group, played“ a central role ”in the development and persecution of the budget for renovation and rebranding. “Their expertise provided the necessary financial structure to align the renovation costs with the forecast income and to ensure a financially viable result.”
Global SCR secured a building loan to finance the renovation. “The loan had strict requirements for financial reporting, in particular for the approval of applications,” Patel recalled. And although there are many financing options for the hotel renovation, he believes that the owners have to consider how much they are willing to pay for it. “The market conditions and the prevailing interest rates have a direct impact on the financing options,” he continued. “Depending on the size of the loan and the project type, certain financing structures may be more advantageous than others. The careful evaluation of these options and the cooperation with experienced financial advisors helped us to secure the most suitable financing agreement for the project. ”
Advice for owners
“Make sure you have a clear understanding of how drawing financing and reimbursement process works with your potential lender,” said Wineman. For example, the team should know whether the owner is first financed and reimbursed the project or whether the financing is already available immediately.
“Work so much in advance to understand existing conditions,” said Kornberg. “Check the budgets and minimize the risk as possible.” The better defined the business plan, the easier the project is to finance and the relationship between the lender and borrower, he added. “As soon as a project is financed, significant changes to the plan generally require a conversation between the lender and the owner, which makes it more difficult to control their own fate as owners.”
Plan the gentle costs for a solemn opening or a relaunch of the hotel, said Wineman. “Provide the necessary time and the necessary money during care to capture the full extent of the renovation and clearly identify the sources of financing to tackle them.”
Peter Hathaway, director and managing director at US REALTY Consultants, agreed and outlined what an organized proposal should look like: You have a good plan of what the vision is and very organized projections and a timeline when things are intended for completion. “
In the renovation budget planning, you will determine how the occupying apartments for the team of the contractor can handle, said Wineman. These can be free rooms in the hotel or paid reimbursement to the general contractor.
“Choose the right partners – financial advisors, market analysts and project managers – to ensure that every decision is supported by quantitative data,” said Patel. “By using expertise and the provision of well -founded financial decisions, hoteliers can optimize their renovation investments and position their real estate for long -term success.”
Capital is always looking for the best operators, the best locations and the best brands, said Stueber. “Having all three in your favor is certainly an advantage for you.”
This article was originally published in the February/March edition of the Hotel Management Magazine. Subscribe here.