All Forum Posts by: Kyle Davis

Help BP members!

I'm proceeding with my first large commercial project (building a new hotel) and working on finding investors/partners.

Here's the deal:

The all-in cost for the project is $4,000,000.  The local bank wants to go with an SBA loan, and they require a 25% down payment (AKA $1,000,000).

The way I would like to structure it (at least the easiest way that I know of in my brain) is to offer 1,000,000 units of ownership priced at $1 each.  And your ownership percentage would be based off of how many units you own in relation to the number of units sold.  So if you bought 50,000 units, it would cost you $50,000 and your overall ownership of the hotel would be 5%  (50,000 units/1,000,000 units offered = 5%).

The monkey wrench thrown into the mix is that the bank requires anyone who is over 20% owner to sign a personal guarantee of the bank loan.  Since I will more than likely be the only person over 20%, it is my opinion that I should probably have more units of ownership given to me as my risk is higher than the other investors.  I was thinking of giving myself an extra 5% ownership for being the personal guarantor of the loan.  So doing the math, there would actually be 1,053,000 units of ownership and the extra 53,000 units would go to me (5% of 1,053,000 is 53,000 roughly).

Feel free to poke holes in this theory, or give me any better ideas!

Thanks!

Kyle

@Vik Desai  Hey Vik!  We put things on hold for a bit as the location where we are hoping to build it is having the road torn up and replaced by the Department of Transportation.  We are hoping to go with GrandStay as a frachise.  We are still hoping to raise some more money in the form of equity capital so let me know if you are interested!

What I'm defining as "hard money" is obtaining a loan from a private investor for a high interest rate that has to get paid back in a relatively short period of time.  Are you able to clarify for me a bit more on "significant upside profit sharing" ?  Thanks!

Hey BP Guys!  I've come a long way in raising money for a new hotel in central Minnesota and have pushed the limits of the people I know that like to invest in real estate projects.  At the moment, I need about another $300,000 to get a franchised hotel built in central Minnesota.  I already have $800,000 raised and am running out of options of people that like to invest in hotels.  Unfortunately, that $300,000 cannot come as debt (aka Gap loans, Hard Money, etc), but it has to be actual cash.  Anybody know of somebody that does this kind of thing?  Thanks!

@Tim Milazzo 

Hey Tim,

I am open to all ideas.  My one concern would be that I need a bank that will do the construction financing and the permanent financing once it's complete.  I also need the 125 % limited personal guarantee's.

Thanks!

Kyle

Just sent the info.  Let me know if it was received.  Thanks!

Need a little advice/insight:

I currently have 25% down payment raised for the construction of a new 40 room, limited service hotel in Minnesota.  I have the franchise agreement signed, TIF Financing secured, land purchased and architectural drawings almost completed.  But when I first started out raising funds 1.5 years ago, my loan officer quoted me a 125% limited personal guarantee for each investor (Meaning if you put in 100k and the project was a total loss, that person would lose their 100k and be required to inject another 125k).  Now that I have the money raised 1.5 years later, that loan officer has changed jobs, I got a new loan officer, and they won't do that limited personal guarantee.  We are a smaller town with two banks that do commercial lending, and one of the banks was the bank originally doing the deal.  The other bank said it was too big of a project for them.  

We have looked at doing the SBA 504 program, but then somebody has to sign off on the entire SBA loan, which will be difficult for me to find somebody to do, as they all are under the assumption of the 125% limited personal guarantee.

Any help with banks that specialize in hotel financing would be wonderful.

To all BP members-

I need a little bit of assistance with nailing down a primary lender for the hotel a bunch of investors and I are doing in Minnesota.  My main bank I was going to use isn't panning out.

So here's some of the details to help get a snapshot of where it's at:

1)  Total cost is $3.7-$3.8 million

2)  Hotel is franchised

3)  We have $860k raised so far for a down payment

4)  I have a third-party feasibility study along with a 10 year pro-forma, business plan, sketches for the hotel, and site map.

What we are looking for:

1) Bank that will lend us 80% LTV. Hotel is currently in the middle of being appraised (according to the bank). Hope to have it back by late October.

2)  4.3% interest rate.  Preferred to be locked in for 5 years and total amortization rate over 20-25 years.  Obviously a fixed rate option over 20 years would be even more ideal.

3)  Interest only during construction (8 months) and 1 year of interest only payments in the first year of operation

4)  Limited personal guarantees to the investment group of 100% of their total cash in the project (meaning, if there was a total loss and I put in $100,000....I would lose the original $100,000 and the bank could come after another $100,000).

If anybody has any leads that could help me out with this, that would be so unbelievably helpful!

Kyle

Does anybody have any experience with obtaining a CMBS type loan for hotels? I'm building a new 40 room, limited service hotel in my hometown (cost of $4 million) and I stumbled upon the CMBS program. Wondering if anybody can hook me up with one, and if anyone has any experience with it, especially in the hotel industry.

Thank in advance!

What loan program/bank are you going through to get 75% LTV non-recourse loans?