Flagged (franchised) Hotels have the advantage of a uniform standard of appearance, cleanliness, layout, room sizes, relative pricing, and amenities (pool, restaurant, exercise room, etc.). Business travelers frequently use the same hotel franchise whenever they travel to a new city. One of the major advantages of enjoying a flag is the national reservation system. A traveler can call a toll-free telephone number, or visit the franchisor's web site, and locate the most convenient hotel in the chain to the city he is visiting.

Franchise Affiliated (Hotel)
(Hotel) A franchise agreement allows the hotel to operate under a particular brand name (e.g. Holiday Inn, Marriott, Hilton, Comfort Inn, etc.) and assures the hotel will be competently managed. Most hotels rely on their franchise agreement to give the property a brand name, to identify and define the service the hotel sells, and to produce a large percentage of its reservations.

Expenses (fees) related to the franchise including royalties, group buying power (discounts on soaps, sundries, etc..., national media advertising, access to the national reservation system, and administration of frequent guest stay or similar programs). These fees can include part of an initial purchase requirement plus an ongoing percentage of gross sales of the business (3% to 10% of its room rents to the franchisor for the use of the name).

In addition, the hotel will be subject to regular quality inspections. If the hotel repeatedly fails these inspections, the hotel will lose its franchise. This happens very regularly.

Reflagging Aging Hotels is a Popular Value-Added Play
There are great benefits to a hotel owner to belonging to a national hotel franchise. Having a flag means the hotel or motel has passed rigorous tests for cleanliness, and the lodging facility enjoys certain modern conveniences, such as telephones, access to the internet, cable television, rooms of a comfortable size, and in some cases a pool, a spa and a restaurant.

Many bridge loans and mezzanine loans are made to hotel owners for reflagging (change national franchises) their hotels. Perhaps the hotel owner has lost his flag or has been given an ultimatum by the hotel franchisor to modernize his hotel.

In other cases, a hotel owner will want to upgrade his flag, maybe from a Best Western to a Holiday Inn. This may involve major renovations, and the bridge loan or mezzanine loan is likely to be structured with an interest reserve to cover the payments during the renovation.

A hotel or motel without a flag is known as an independent hotel.
Independent hotels are unknown to strangers and are at a great competitive disadvantage. Travelers, especially business travelers, need to be able to count on finding lodging with a reliable level of service when they arrive in a strange city.

Limited Service - Economy Hotel
A Limited Service Hotel property subtype is typically characterized by standardized accommodations, little or no extra services available to guests and a discounted price. Frequently, these properties are part of a limited-service division of a major hotel chain. They offer a value-conscious alternative to full-service hotels for travelers not needing restaurants, etc. Limited-service hotels have experienced tremendous growth over the past 10 years.

This would include franchise hotels such as Comfort Inn, Hampton Inns, Homewood Suites, Holiday Inn Express, La Quinta Motor Inn, Shoney's, Budgetel Inns, Econo Lodge, Fairfield Inn, Knights Inn, Nendels, Red Carpet Inn, Red Roof Inns, Sleep Inns, Super 8 Motels, Travelodge, Friendship Inns and Motel 6, in addition to numerous independent properties in this market.

Limited Service - Extended Stay Hotel
A Limited Service Hotel property subtype is typically characterized by standardized accommodations, little or no extra services available to guests and a discounted price. Frequently, these properties are part of a limited-service division of a major hotel chain. They offer a value-conscious alternative to full-service hotels for travelers not needing restaurants, etc. Limited-service hotels have experienced tremendous growth over the past 10 years. Extended stay properties offer basic accommodations catering primarily to long-term guests (one week or greater). They usually are basic in nature, offer few, if any, amenities, and are promoted on the basis of price, functionality and convenience. Most properties of this type offer only one floor plan, usually a kitchenette-type unit, and a telephone and television in the rooms. The properties also feature a long-term rate (weekly and/or monthly), and are often utilized by long-term employees in the area, people relocating to the area, or others needing longer-term accommodations at a reasonable price. Operating costs tend to be lower with this type of property, due to the limited services provided, and the semi-residential nature of the property.

Limited Service - Midscale Hotel
A Limited Service Hotel property subtype is typically characterized by standardized accommodations, little or no extra services available to guests and a discounted price. Frequently, these properties are part of a limited-service division of a major hotel chain. They offer a value-conscious alternative to full-service hotels for travelers not needing restaurants, etc. Limited-service hotels have experienced tremendous growth over the past 10 years. Mid scale hotels would include hotel types from 250-room airport locations to 100-room roadside franchise properties. Such properties may include Best Western, Clarion, Days Inn, Holiday Inn, Howard Johnson, Marriott Courtyard, Park Inn, Quality Inn, Rodeway Inn and Ramada Inn, as well as quality independent hotels.

Full Service - Luxury Hotel
A Full Service Hotel property subtype typically has a full array of services available to the traveler. The extent of these amenities varies, depending on the type of the hotel/motel (star rating, etc.), particular chain, etc. However, at a bare minimum, the property should offer: on-site restaurant or dining facilities; meeting or banquet rooms; swimming pool; and 24-hour lobby/front desk. Other amenities frequently found in full-service facilities include: business centers; one or more retail shops to serve guests; more extensive health clubs; and transportation to and from airports or other nearby destinations. Floor plans of the guest rooms vary the most of any type of hotel property, from basic guest rooms, to "junior" suites, to larger suites suitable for VIP parties. This type of property is usually the most susceptible to profitability pressure, due to the fact that there are relatively high operating costs, due to the full service nature of the property, while the same time there is pressure on revenues, due to the fact that the property often competes with limited service properties in close proximity, which can charge lower room rates. This subtype typically ranges from 500-room resorts to 300-room all-suite hotels. Luxury hotels would include Crowne Plaza, Doubletree, Embassy Suites, Hilton, Hyatt, Marriott, Omni, Radisson, Residence Inns, Sheraton, Stouffer Hotels, Sonesta and Westin, in addition to a wide array of well-known independent hotels.

Full Service - Midscale Hotel
A Full Service Hotel property subtype typically has a full array of services available to the traveler. The extent of these amenities varies, depending on the type of the hotel/motel (star rating, etc.), particular chain, etc. However, at a bare minimum, the property should offer: on-site restaurant or dining facilities; meeting or banquet rooms; swimming pool; and 24-hour lobby/front desk. Other amenities frequently found in full-service facilities include: business centers; one or more retail shops to serve guests; more extensive health clubs; and transportation to and from airports or other nearby destinations. Floor plans of the guest rooms vary the most of any type of hotel property, from basic guest rooms, to "junior" suites, to larger suites suitable for VIP parties. This type of property is usually the most susceptible to profitability pressure, due to the fact that there are relatively high operating costs, due to the full service nature of the property, while the same time there is pressure on revenues, due to the fact that the property often competes with limited service properties in close proximity, which can charge lower room rates. This subtype typically ranges from 200-room resorts to 100-room all-suite hotels. Mid scale hotels would include hotel types from 250-room airport locations to 100-room roadside franchise properties. Such properties may include Best Western, Clarion, Days Inn, Holiday Inn, Howard Johnson, Marriott Courtyard, Park Inn, Quality Inn, Rodeway Inn and Ramada Inn, as well as quality independent hotels.

Resort Area (Hotel)  (Property Info.)
A place or geographical area (e.g. city, county, region) where tourism substantially contributes to the local economy; a place frequented by people for relaxation or recreation (e.g. beach resort, ski resort).

Full Service - Resort Hotel
A Full Service Hotel property subtype typically has a full array of services available to the traveler. The extent of these amenities varies, depending on the type of the hotel/motel (star rating, etc.), particular chain, etc. However, at a bare minimum, the property should offer: on-site restaurant or dining facilities; meeting or banquet rooms; swimming pool; and 24-hour lobby/front desk. Other amenities frequently found in full-service facilities include: business centers; one or more retail shops to serve guests; more extensive health clubs; and transportation to and from airports or other nearby destinations. Floor plans of the guest rooms vary the most of any type of hotel property, from basic guest rooms, to "junior" suites, to larger suites suitable for VIP parties. This type of property is usually the most susceptible to profitability pressure, due to the fact that there are relatively high operating costs, due to the full service nature of the property, while the same time there is pressure on revenues, due to the fact that the property often competes with limited service properties in close proximity, which can charge lower room rates. This subtype typically ranges from 500-room resorts to 300-room all-suite hotels. Resort hotel properties are characterized as properties that are the destination and/or attraction themselves for travelers. People come to a resort for the resort itself and often for no other purpose. Usually set in locations of significant natural beauty or with other nearby dominant attractions, resorts feature the amenities of a full-service hotel property, often with additional amenities such as various sports facilities and/or swimming pools, manicured grounds and landscaping, special and/or premium entertainment offerings and guest activities of various types. There are usually adequate facilities for meetings and/or conferences, as many business functions are often held at resorts. Resorts are often clustered in close proximity to other resorts. While operating costs tend to be high at most resort properties, room revenues are usually less susceptible to pressure, due to the destination characteristics of the property and the lower sensitivity to price among most of the property's customers.

More Lodging Terms and information below

Guest Corridors (Hotel)  (Building Info.)
In hotels, the area(s) through which guests gain access to sleeping rooms. Includes - All Interior, All Exterior, Mostly Interior, Mostly Exterior.

Outbuilding (Hotel)  (Building Info.)
A building or structure that supports the primary use of the property (e.g. in hotels, an outbuilding may include a health club, maintenance garage, service building, etc.).

Primary Guest Type (Hotel)  (Building Info.)  
For hotels, identifies the primary type of guests. (Application Info. - Options include Business, Government, Traveler, Business or Vacation, Business/Economy, Extended Stay, Other).

Business or Vacation Primary Guest Types
Identifies that the hotel rooms are predominately occupied by business and/or vacation travelers.

Business Primary Guest Types
Identifies that the hotel rooms are predominately occupied by business guests.

Business/Economy Primary Guest Types
Identifies that the hotel rooms are predominately occupied by business and/or economy guests.

Traveler Primary Guest Types
Identifies that the hotel rooms are predominately occupied by guests traveling along a route towards a destination (usually one-night stays).

FF&E / Cap. Ex. (Hotel)  (Underwriter Info.)
Furniture, fixtures and equipment; an expense line item in hotel properties that represents a reserve to fund the replacement of furniture, fixtures and equipment; commonly referred to as FF&E.

Food and Beverage
In hotel operations, when the food and beverage department is managed independently from the general hotel operations.

Food & Beverage Exp. (Hotel)  (Income Expense Info.)
An expense line item for hotel properties. Food expenses represent the expenses related to food revenue, including functional areas such as breakfast, lunch and dinner restaurants, room service, carry out, lounge food, sundry/merchandise, banquet food and kitchen. This item includes food cost of sales, salaries and wages, payroll taxes and benefits, and other related expenses such as advertising, china/glass/silver, cleaning supplies, contract cleaning/labor, decorations, entertainment, equipment rental, glass/plastic supplies, guest satisfaction/supplies/transportation, happy hour appetizers, in-room entertainment, kitchen fuel, laundry allocation, licenses, linen, menus, miscellaneous, napkins, office supplies, operating supplies, over/(short), paper supplies, preparation supplies, printed supplies, promotion, telephone admin., training materials, uniforms, etc. Beverage expenses represent the expenses related to beverage revenue (bar and banquet bar), including beverage cost of sales, salaries and wages, payroll taxes and benefits, and other related expenses such as advertising, Cable TV, china/glass/silver, cleaning supplies, contract cleaning/labor, decorations, entertainment, equipment rental, glass/plastic supplies, guest satisfaction/supplies/transportation, happy hour appetizers, in-room entertainment, laundry allocation, licenses, linen, menus, miscellaneous, napkins, office supplies, operating supplies, over/(short), paper supplies, printed supplies, promotion, telephone admin., training materials, uniforms, etc.

Food & Beverage Revenues (Hotel)  (Income Expense Info.)
A revenue line item for hotel properties. Food & Beverage revenues represent the income from functional areas such as breakfast, lunch and dinner restaurants, room service, carry out, lounge food, sundry/merchandise, banquet food and kitchen and all beverage revenue (bar and banquet bar).

Room Exp. (Hotel)  (Income Expense Info.)
An expense line item for hotel properties. The expenses related to room revenue, equipment rental, and public meeting room revenue, including functional areas such as the front office, reservations, housekeeping, laundry, uniform service, complimentary breakfast and bar. This item includes salaries and wages, payroll taxes and benefits, and other related expenses such as cable TV, china/glass/silver, cleaning supplies, complimentary food & beverage, contract cleaning/labor/laundry, cost of food/beverage, decorations, entertainment, equipment rental, glass/plastic supplies, guest satisfaction/supplies/transportation, happy hour appetizers, in-room entertainment, laundry allocation/supplies, linens, miscellaneous, office supplies, operating supplies, over/(short), paper supplies, printed supplies, promotion, reservations assessment, telephone admin., training materials, travel agent commissions, uniforms, VIP expense, walk expense, etc.

Room Revenue (Hotel)  (Income Expense Info.)
A revenue line item for hotel properties. The income related to room revenue, equipment rental, and public meeting room revenue, including functional areas such as the front office, reservations, housekeeping, laundry, uniform service, complimentary breakfast and bar.

Rooms with Kitchens  (Building Info.)
In hotels, rooms with kitchens may include a refrigerator, stove/oven, dishwasher, etc.

Mmany commercial mortgage lenders will not lend to unflagged hotels and motels. Commercial Financing and Underwriting Commercial Loans on Hotels
Commercial Lenders Will Lend Up to 65% to 70% LTV on Hotels
Commercial mortgage lenders are hungry for commercial loans on flagged hotels these days. Occupancy levels are historically very high right now because most new hotel construction ended on September 11th.

Typically commercial banks today will lend up to 60% of cost to build a new major-flagged hotel. Commercial developers will usually contribute 15% of the total cost and obtain a mezzanine loan for the balance.

here is a great rule of thumb:

Hospitality properties typically sell for around three times their gross annual rents. A motel bringing in $1 million a year in revenue will sell for around $3 million. If it is a gorgeous, newer hotel, it might sell for 3.5 times it gross annual income.

Lodging Financing - Hotels/Motels
Best Rates are associated with: Properties with >1.75 DSCR, <65% LTV, >60% occupancy, market ADR, appropriate reserves for FF&E, Franchise Fees, Advertising & Marketing, Repair & Maintenance

Issues:

For Definitions of Commercial property types etc... (see Commercial Glossary)

  

Commercial property loan rates are at all time low.

March 01, 2006 - National Average on a $1,000,000 loan amount,
amortized at 25 years.

• Fixed rates are based on a 10-Year fixed rate term.
• Fixed rates reflect conduit lenders and
• Variable rates reflect portfolio lenders.

Multifamily Financing Permanent Loan Amounts - $25,000 - $1 Billion

• Fixed Rate Retail Property Loans 5.51 - 8.10%
• Variable Rate Loans for Retail Properties 4.66 - 6.25%
  • Cap Rate 6.9% to 9.5%

Colorado Rates remain below the above National Avg.
See our rate page for all markets effecting rates

Commercial mortgage lenders typically require specific loan level data about a property in order to analyze the underwriting risk, prepare a loan quote, and ultimately fund a loan. Mortgage brokers are a primary source of commercial loan originations today. As a result, lenders' expectations regarding the level of reporting, analysis and overall quality of the origination are increasing.

Unfortunately, there are many brokers who can't obtain financing for commercial properties because they use a residential loan application to submit to lenders
- BIG MISTAKE !

See Example Loan Package Extracts

Unlike Residential financing where the Borrower must qualify for the mortgage product; Commercial financing differs whereby the Property must qualify (not the borrower).

How MTG Brokers Corp. Gets You the Best Rate for Your Commercial Property

Commercial mortgage rates are commonly based on the 10-Year US Treasury yield plus a lender Margin/Spread.
 
The interest Rate Index change is based upon market and trading conditions, while spreads are influenced by loan/property factors - primarily Debt Service Coverage and Loan To Value.
 
Property that demonstrates a high DSCR and low LTV will likely command a lower interest rate.  

MTG addresses DSCR/LTV issues via calculations to analyze reserves, fees and other lender underwriting constraints that can impact a properties Net Cash Flow and therefore, the overall interest rate and loan pricing at the time of your loan origination.
 
This is where others fail to obtain you a lender commitment and why we don’t collect any fees until after an offer is submitted by a lender to you “for your approval”
(Typically, A National, Regional or Colorado Lender You Know and Trust !)
 

Commonly Required Property Data and Format

While loan submission requirements may vary among lenders, most lenders request the inclusion of the following core loan data:

• General property and building description
  
• Current rent roll to reflect lease start/end dates, square footage or unit type, contract rent, rent escalations, reimbursement issues, and estimated market rent
  
• Property income and expense worksheet including calculations for net operating income (NOI) using at least two historical years of income and expense
  
• Calculation and support of normalized net cash flow (NCF) including appropriate reserves based on property type (e.g., vacancy & collection Loss, management, capital expenditures, tenant improvement costs, leasing commission costs (TILC)
  
• Reconciliation of direct capitalized value to purchase price
  
• Loan amount constrained by maximum loan to value (LTV) and debt service coverage ratio (DSCR)

For a Retail Commercial Loan (Click Here)
Construction, Purchase, Refinance, Bridge, Hard Money

Or Visit One of These Pages


Office Building Commercial property Loan Rates and Financing Info.
Office Includes: Central Business District (CBD) Office, Suburban Garden Office, Suburban High Rise Office, Medical Office, Other Office, Doctor Office (for patients requiring bed space - Choose Health Care)

Retail Commercial property Loan Rates and Financing Info.
Retail Properties Include: Grocery, Strip Center, Mall, Outlet Center, and Specialty Center (Car Wash, Golf Course, Auto Repair, Dry Cleaners, Cemeteries.....), etc...

Industrial Warehouse Commercial property Loan Rates and Financing Info.
Industrial and Warehouse include: Warehouse with Office, R & D, Manufacturing, Flex Space, etc...

Multifamily Commercial property Loan Rates and Financing Info.
Multi Family: Apartments, Condos, Townhomes, Military and Student Housing, Community Developments, etc...

Lodging, Hotel, Motel Commercial property Loan Rates and Financing Info.
Hotel Include all Lodging, Motel, Economy, Luxury, Resort, Extended Stay, etc...

Mobile Home Parks Commercial property Loan Rates and Financing Info.
Mobile Home Parks: RV and other Pad rental space

Healthcare Commercial property Loan Rates and Financing Info.
Health Care: Nursing Home, Cognitive Care, Assisted Living, Hospitals, etc...

Self Storage Units Commercial property Loan Rates and Financing Info.
Self Storage (Mini-Storage, Climate Controlled / Refrigerated Storage, Yard Storage, Other Storage)

Mixed-Use Commercial property Loan Rates and Financing Info.
Mixed-Use: A combination of usually two of the following: Office, Retail, Hotel, Multifamily, Industrial

Including:
Community Development & Financing
Agricultural Use Property
Rural Area Lending
Land Financing

  
for other available financing options - Please see:

• Hard Money
  
  
• Please Visit Bridge Loans for for the development of new commercial properties, or the renovation and repositioning of existing properties, for both pre-leased and speculative development.
  
  

  For Commercial Mortgage industry...
  see our page on CMBS (Commercial Mortgage Backed Securities)
  2nd mortgages not allowed...we show a way around this
  
  
  see Mezzanine Loans ...for Commercial Mortgage Loan Financing
  How to get a Junior Lien (similar to second mortgage)
  
  

• 1 - 4 Unit Financing (Typical Bank Loan Products for Investors), and 2nd home financing.
   
• Fix-N-Flip for 1-19 unit investment financing
   
• Investment_Specials

  
  
Also see Balloon Mortgage for Variable Rate & Cap Rate.
 
  
  
Please see the Commercial Only Glossary
(see Commercial Glossary)