Excerpt from CoStar
Lenders More Apt To Finance a Deal if a Brand Is Attached
Investors in independent hotels are being forced to rethink deals overall.
During an investment panel at the 2023 Indie Lodging Congress, Ben Rowe, co-founder and managing partner of private equity firm KHP Capital Partners, said it's generally more difficult to finance an independent hotel than a branded one.
"Who you go to, those relationships are more important than ever," he said. "In today's environment, when lenders are more risk-averse and looking for reasons to say no, they may not be able to stretch and accept the idea of not having a brand."
KHP is working on an adaptive-reuse project with a lender who it had a relationship with and was interested in the deal but recently came back to KHP unable to finance it without a brand.
"We were planning to do this as an independent, we still may do it ... but it's leading us to rethink whether we actually need to do this branded to secure the debt," Rowe said.
Tamarack Capital Partners has completed three deals since the onset of the pandemic. All three included branded hotels, said CEO and co-founder Heather Turner.
Turner's company invests in independent hotels, soft brands and hard brands. Tamarack Capital Partners has not had to refinance any of its independent hotels.
"I will say the benefit independent properties sometimes have over the branded properties is they tend to be smaller. The smaller check-size deals [$50 million and below total capitalization] are the ones getting done today both on the equity and the debt side," she said. "Smaller regional banks are more active than the large money center banks. High-net-worth investors are more active than our large institutional investors."
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