In particular, CMBS loans can help hotel and hospitality companies:

• Acquire new properties: If you want to purchase a new hotel property to add to your company’s portfolio, but you don’t have a ton of collateral to work with, a CMBS loan could be a great way to get the funding you need.

• Refinance variable-rate loans: Many hotels have decided to refinance variable-rate loans, such as variable-rate SBA 7(a) loans, with fixed-rate CMBS financing. This allows them to rest easy, knowing that their interest rates won’t suddenly go up due to fluctuations in indexes such as the prime rate or LIBOR.

• Get the funds to make renovations: Since most CMBS loans have no specific cash-out restrictions, many hotel owners have decided to use CMBS cash-out refinances in order to acquire the funds to remodel their property, enhancing its long-term profitability. In addition, some owners of branded hotels use CMBS cash-out funds to complete Property Improvement Plans, or PIPs. PIPs, such as Holiday Inn’s well-known Formula Blue PIP, are specific remodeling plans that bring a hotel in line with current brand standards.

  CMBS Hospitality Property Types

CMBS loans can help provide financing for a variety of hotel, motel, and resort properties, including:



• Boutique hotels: Whether your boutique property is completely independent, or part of a larger group of hotels that you or your company owns, refinancing with a CMBS loan can help provide the financing you need to expand, renovate, or remodel your property. Plus, if you want to acquire a new boutique hotel into your collection, a CMBS loan can also help you do so.

• Large branded hotels: If you own (or want to acquire) a branded hotel, such as a Hilton, Hilton Embassy Suites, or Radisson franchise, a CMBS loan could be a great way to do it. While opening or purchasing a major branded hotel usually requires a large upfront investment (sometimes in the tens of millions), doing so can provide incredible financial rewards in the long run.

• Budget hotels/motels: Budget and value hotels, such as Red Roof Inn, Motel 6, and Extended Stay America provide a valuable service to business travelers and others who are looking to for a comfortable and economical place to stay. And, whether you want to get into the budget hotel business, or simply want to get a little equity out of a budget hotel that you currently own, a CMBS loan could be the perfect solution.

• Hostels and bed and breakfasts: While it’s true that most hostels and bed and breakfasts may not be large enough to qualify for CMBS financing, those that meet the size requirements can still benefit from a CMBS loan.

CMBS Loan Terms for Hotels and Hospitality Properties

Standard CMBS loan terms for hotels, motels, resorts, and other similar properties typically include:

• Loan Size: $2 million minimum, no maximum

• Loan Terms: 5-10 year fixed-rate terms with amortizations of 25-30 years

• Eligible Properties:

  • Both branded (“flagged”) and unbranded properties eligible

  • Full service hotels and limited service hotels/motels eligible

  • Properties typically should be in strong markets, and have a good history of financial performance

  • Management should ideally be both effective and experienced

• Leverage:

  • Flagged/branded properties: 75% maximum LTV/1.40x DSCR

  • Non-flagged/unbranded properties: 70% maximum LTV/1.50x DSCR

• Pricing: Typically based on LTV and DSCR

  • Flagged/branded properties: Typically start at 150 bps over U.S. Treasury rates

  • Non-flagged/unbranded properties: Typically start at 180 bps over U.S. Treasury rates

• Assumability: CMBS hotel loans are typically fully assumable, though a fee may apply

• Prepayment Penalties: Defeasance or yield maintenance

• Recourse: Typically non-recourse with standard bad-boy carveouts

• Third Party Reports:

  • Full Property Appraisal

  • Phase I Environmental Assessment

  • Project Capital Needs Assessment (PCNA)

  • ALTA Land Survey

Get a Free Hotel Property Loan Quote Today

If you’re looking for a hotel property loan from $2,000,000 and up, simply click the button below for a fast, easy, and free quote from an experienced CMBS loan expert. You can also email us any time at loans@cmbs.loans.
In this article:
1. CMBS Loan Terms for Hotels and Hospitality Properties
2. Get a Free Hotel Property Loan Quote Today
3. Get Financing