Category Archives: Hospitality

Cash out for refinance

1031 Exchange for New Florida Hotel Owner

Our Florida client came to us with a 1031 exchange.

The client was getting ready to sell a Georgia property. They were using the proceeds to purchase a new hotel in central Florida. To minimize their tax exposure, they were utilizing a 1031 exchange.

A 1031 exchange, also known as a like-kind exchange, is a real estate investing tool. It allows investors to swap out one investment property for another, deferring certain capital gains taxes. 

Our entire team worked closely with our client, always mindful of the 1031 exchange deadline.  He is now the proud owner of his hotel. He is very skilled at increasing profitability and is ready to take on the challenges of his new property. Our client was appreciative of the availability of the entire GRP Capital team, even exclaiming, “You always are there for me. I appreciate what you are doing.”

Tips for Handling a 1031 Exchange Deadline:

• Secure specialized help. Be sure your attorney has experience with 1031 purchases and sales. In addition, be careful when choosing a title company for the sale of your property. Be sure they have the ability to hold the proceeds in escrow as you wait for the purchase to go through.

• Know your deadline. Many business owners have their eye on purchasing a new property. Sometimes, they plan to sell another asset for their equity injection. That is a great plan. However, make sure the loan is feasible, and that a lender can close the loan to meet your 1031 exchange deadline. The SBA (Small Business Administration) is still a great resource for hotel loans, but be aware that SBA loans take a bit longer to close, especially 504 loans.

• Get all of your own financial documents ready:  Lenders will require taxes to be filed (or extensions), as well as financials that are less than 90 days old. Work with your accountant and other professionals and let them know your 1031 exchange deadline.

• Make it legal:  Work with your attorney so that your borrowing entity has an operating agreement or bylaws, is registered in the correct state and can be licensed correctly. 

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Helen Georgia hiking trail mountains

New Georgia Hotel Loan

Senior Associate Ryan Dumas has helped his client close a Georgia hotel loan, using the SBA 7a program. The loan has fixed rates, which were very competitive in today’s marketplace.

Our Georgia hotel client was ready to take on a new business. To be sure, she has a great deal of experience in hospitality ownership and management. Therefore, this Georgia hotel loan was important to her and her family.

Ryan and our in-house underwriting and credit analysis team recommended an SBA 7a loan for a number of reasons. Firstly, the loan fit many of the 7a parameters. In addition, lenders are more willing to make hospitality loans when they come with an SBA guaranty.

Ryan was very pleased with the process. He stated, “We really are the leaders in the marketplace in closing SBA 7a loans. Our GRP team knows which lenders are interested in lending for hotels (not all banks are). This saves our clients a lot of time, not to mention money. I’m pleased to be part of the solution for these wonderful clients.” As for our client, she is busy working on improving the operations of her new hotel and said in an email, “Thank you for all your help obtaining the property. You were all great!”

Basic SBA 7a Information:

• What can a SBA 7a Loan used for? Limited to $5,000,000, borrowers can use this type of loan for purchases of businesses including equipment, renovation/construction and refinancing, too. Borrowers can even take out an SBA 7a loan for changes of ownership.

•How does an SBA 7a differ from an SBA 504? In order to apply for an SBA 504 loan, borrowers must work with both a CDC (Community Development Corporation) and a senior lender. The CDC has to officially submit the loan to the SBA for approval. In addition, the CDC also approves the lender. Typically the CDC and the lender each have their own underwriting processes, which happen simultaneously. These extra steps typically lead to a lengthier closing. GRP Capital advises 504 loans when borrowers have sufficient time in their purchase sale agreement and for larger loans, too.

• Why do lenders like SBA loans? It’s all about risk! Lenders are by nature risk-averse. The SBA guarantees the majority of the SBA loan, which removes a great deal of the risk from the lender. So it’s a win-win for them. They get to have a loan on their books without the full amount of the risk they incur with conventional loans. GRP Capital is continuing to dialogue with our network of lenders. We think it’s important that lenders understand the many stable, profitable hospitality businesses that are out there.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Working together on SBA 504 loans

SBA 504 Loans for Hospitality

Once again, Ryan Dumas has helped a client close a hotel loan, this one in an East Coast resort location.

Ryan’s client, an experienced hotel owner, was prepared to purchase a hotel. This property was not too far from a current one he already owns. Our client knows this community well and had been keeping his eye on this hotel. He believed that the hotel had the potential to be even more profitable with strategic, experienced management, which he had the time and skills to provide.

Our in-house underwriting and credit analysis team recommended an SBA 504 loan to our client. Many lenders are still skittish about hospitality loans. However, the guaranty of one of the SBA 504 loans is enticing to a greater number of lenders. Working with a certified development company as well as a senior lender, our team was able to shepherd the loan through this complex process.

Our client has taken possession of his new hotel. His strong business skills should allow him to capture even more of this resort market. He remarked, “I know you worked very hard to process my loan.” During the loan processing, we spoke to him every day. So we are going to miss him while he’s busy with his new business!

FAQs on SBA 504 Loans:

• What can an SBA 504 Loan be used for? Purchase of a business or equipment as well as renovation/construction for an existing business. At this time, SBA 504 loans cannot be used for refinancing.

• What is a Certified Development Company (CDC)? In order to apply for an SBA 504 loan, borrowers must work with both a CDC and a senior lender. The CDC has to officially submit the loan to the SBA for approval. In addition, the CDC also approves the lender. Typically the CDC and the lender each have their own underwriting processes, which happen simultaneously.

• How Complicated are SBA 504 loans? To be honest, there are a lot of moving parts. Essentially, you are applying simultaneously for two loans and closing them at the same time. Having GRP Capital to assist in the large numbers of document collections saves clients a huge amount of time and hassle. In addition, GRP Capital already has positive working relationships with many CDC’s and knows which lenders are willing to make hospitality loans.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

We Did It! Fast Closing for two Midwest loans

Ryan Dumas‘ clients came to him with a challenge and a problem. How quickly could GRP Capital close not one, but two hotel loans?

It was a challenge, but our team, working together, was up to the task. In fact, we closed both loans in under 40 days. This was one of our fastest hospitality loan closings, and a source of great pride!

Our clients, experienced hotel owners, now own two new hotels. They were pleased with the results and the team approach to the various issues that come up during a closing. During one conversation, the client said, “My attorney was impressed with you. You really got quick results.”

Quick closings are not always possible. But sometimes they are absolutely required.

Reasons for a Fast Closing:

• Issues facing the seller: A property might come on the market due to a seller issue. They may have another business they want to fund with the proceeds. Sometimes, sellers just simply are ready to retire. While not every reason is truly a “crisis” requiring a quick closing, we try to expedite the process.

• Competitive Bidding. Borrowers will sometimes feel tremendous pressure to close when sellers indicate there are other buyers out there. We try to caution everybody that super fast closings are not always possible (and are becoming rarer in both hospitality and construction loans). In addition, a loan in progress will almost always close more quickly than starting over with another buyer.

• Using proceeds from a 1031: Borrowers who are planning to use the proceeds from a previous commercial real state sale save taxes by quickly using the profits on a new purchase. This transaction, called a 1031 exchange, has a time limit between the sale and the new purchase. This can legitimately necessitate a quick closing.

What Can you do to Expedite Closings?

• Have your books in order: Borrowers need to have up-to-date personal financial statements. Their taxes must be filed or on extension. And the borrowers must have their hands on good, solid information about the business they are buying. Lenders must be assured, especially for a fast closing, that borrowers can make loan payments.

• Put your CPA on speed dial. As a borrower, you will need multiple documents including up to date financials. If your CPA regularly submits monthly reports to you about other businesses you own, that’s awesome. If not, let your accountant know that you are in the loan process and may need accurate documents quickly. You may have to pay for this short-term additional work. We recommend doing so.

• Work with an attorney: Fast closings are almost impossible without good counsel. Contact your real estate attorney and include them in decisions and document creation. Use their advice as you create borrowing entities and attendant operating agreements. DIY is not great for fast closings. Solid legal advice is needed.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Texas Buyers Needed Bridge Loan

Our clients had their eyes on an upper moderate hotel in South Texas. They had chosen their lender.

But this story almost didn’t have a happy ending. Their lender dropped the loan in the middle of underwriting!

Lender dropout is a real problem and it is becoming more common in the current economic climate. And even more upsetting, the seller was adamant about the timeline: no extensions!

The buyers came to us in a bit of a crisis. They needed a loan fast!

Rick Patel and Krishan Patel worked closely with the client partnership group. First GRP Capital recommended a restructuring of the loan. As a result, traditional lenders would be more willing to finance it. But, being realistic, they recommended a bridge loan. Bridge financing is a short term loan, designed to bridge the gap between undertaking financing and finding a permanent financing product. Bridge loans can be the perfect solution when the loan absolutely has to close, but the clients need more time to get everything right.

With a lot of work, this story had a happy ending. Our clients are the owners of a new hotel. They have short-term financing and are working with GRP Capital now to finalize their long-term financing needs.

Bridge Loan Basics:

• Short-term financing that has to stay short-term. Bridge lenders are interested in short-term financing only. They want to know that clients have an exit strategy to obtain permanent financing.

• Premium comes with a price. Bridge lending has a built in cost, usually a higher interest rate. This is another inducement to find permanent financing quickly.

• Be prepared for careful underwriting: Bridge loans are a somewhat riskier product for the lender, so lenders will work to protect themselves. They will conduct their own underwriting and it will be quite similar to a conventional lender’s underwriting protocol. Bridge lenders want to ensure that your loan will be able to be funded elsewhere pretty quickly. So they will look at your loan structure, your cash positions and your debt coverage before offering even this emergency financing.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

First Time Owner Buys Florida Hotel

Our client was ready to be a first time owner of a hotel.

He had already successfully owned and operated several fast casual restaurants. Now he was ready for the challenge and the potential opportunity of a Florida hotel.

Our client had been looking for properties in the west coast of Florida for a while. He knows that market well and it is close to where he lives. He was keeping his eye on several hotels that were rumored to be going on the market. When they became available, with our advice, he made a competitive bid which was accepted. Now, he just had to close by the seller’s timeframe.

A first time owner needs a little more attention. Rick Patel and Krishan Patel worked closely with the client, along with Keren Alpert, our loan processor. We advised him on setting up his corporation. We recommended that he bring in an experienced minor partner, at least at the beginning. We also were a resource in engaging legal counsel and insurance.

The partnership group coalesced and the loan closed. Our client told us, “Thank your team for all the help during the process”. His hotel is ready for the Florida high season.

Tips for First Time Owners:

• Stay within your budget. Just because you are ready to take on this new challenge, don’t feel pressured to spend more than you are able to. As exciting as new ownership is, affordable ownership is your goal.

• Engage your attorney and accountant. First time owners are wise to assemble a team of professionals in addition to utilizing your GRP team. Do not try to save money by serving as your own attorney or accountant. Accountants needs to be on board to provide monthly updated financial reports for any businesses you own. Lawyers can help you in negotiating with the seller (and their lawyer), as well as prepare and review documents and make any necessary changes to agreements.

• Start working on obtaining insurance right away! Obtaining insurance is not super fast for new properties, especially in certain coastal areas. Particularly if you require flood insurance, begin that process as soon as your PSA (purchase sale agreement) is signed. Sometimes you may also need life insurance either because you are a key employee, or because of a collateral shortfall. It can take weeks to obtain the life insurance policy and assignment, so begin that process right away as well.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Client-Focused Gets the Loan Closed

What does it mean to be client-focused?

At GRP Capital, client-focused means understanding the specific needs and wishes of our clients. Every loan is different and every borrower is unique. We find out from our clients what the most critical aspects of their loans are and try to match them up with the best fit for their needs. We never try to shoehorn a square peg into a round hole!

Our Carolina clients worked closely with Senior Associate Ryan Dumas in order to purchase a new hotel, using the proceeds from a recent sale. The clients came to us after parting ways from a previous lender, who could not honor the terms the borrowers had signed up for.

Ryan said, “We always work as a team to help our our clients and this was no exception. The borrowers had a busy schedule including travel and so did the seller. But we stayed on top of lots of details. First, we collaborated on the personal financial statement with the buyers, to make sure it was accurate and showed good post-closing liquidity. Then our team helped make sure the PIP was accurate and had a realistic budget. Later we also worked very closely with franchise, insurance providers and lenders, all of whom had their own processes and their own requirements. And just to make things more complex, the borrowing group had several minor partners.”

What Does Client-Focused Mean?

• Know our client’s business. We take the time to know our borrowers. Before we try to match them with a lender, we know the strengths of their business plan, possible roadblocks to funding and their strengths as borrowers.

• Think Two Steps Ahead We plan your loan process from the time you make an inquiry to us until you sign your loan documents and get funded. We set a target date and determine what aspects of your loan could take the most time. Whether it is an old gas station that used to be on the corner of your property, a previous insurance claim or a couple of dings on a credit report, we are prepared.

• Quick and responsive communication We are known for our speedy response time. Our loan processors always return emails and phone calls quickly. Taking on a new loan is stressful, so we want fast, clear communication all the time. And even if our clients don’t know it, we have regular meetings about your loan twice a week to make sure we are making adequate progress.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Florida Hotel Closes with SBA 504

Our Florida client was able to purchase a new Gulf Coast hotel, taking advantage of an SBA 504 loan.

As experienced multi-family owners, our clients had their eyes on a South Florida property.

However, the lending space has changed recently for hospitality loans. Consequently, lenders and borrowers are interested in the guaranty that the SBA loans provide. The benefit of an SBA 504 loan is that it is fixed interest and competitively priced.

GRP Capital President Rick Patel and the whole team worked closely on this loan. He noted, “The SBA 504 loan process is a little more rigorous. Sometimes this can scare clients. But our team worked closely with all of the various personnel to get this loan closed. I want everybody to consider SBA financing when it is appropriate. We know we have the systems in place to make the detailed underwriting much easier for our clients so they can take advantage of the SBA products.”

Fast FAQ’s on SBA 504 loans:

• What’s a CDC? A CDC is a Certified Development Company. These are community-based partners who underwrite the loan and create the package. They are the first step in getting a loan closed. Most importantly, they know their way around the SBA and the best paths to secure SBA approval.

• Tell me the difference between the SBA 504 and the SBA 7a: The 7a loan is typically (although not always) for smaller loans and for businesses that might have more trouble obtaining conventional financing. Currently SBA 504 loans hold fixed rate loan structures, while many SBA 7a loans are structured with a variable rate. Both loan products can be used for purchases and construction, while 504 loans may have restrictions regarding refinanced debt.

• Is the equity requirement affordable in an SBA 504 loan? Typically, yes, but every project is different. In the case of this closing, the equity contribution met the budgetary needs of the borrowers.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Michigan Hotel Loan Closes

Dominating the market with a new Michigan hotel loan.

That’s what our clients are now doing. Previously they owned another hotel at different price points not too far from this Michigan location. Now the purchase of this new property means they really are dominating the local market. Ultimately, they can now target different customer bases through their marketing and their differentiated rate structures.

This is the third loan closing Senior Associate Ryan Dumas has accomplished for this partnership group. Ryan worked closely with the younger partners, who are next generation hoteliers. To do so, Ryan, along with our management team, provided expert guidance. As a result, this Michigan hotel loan closed with favorable terms. Ryan said, “These clients are experts in running their hotels. However they needed our expertise in loans, especially moving from non-traditional to traditional financing. They have reliable, steady financing now, and they can focus on operational challenges.”

Clearly these clients turn to Ryan and to GRP Capital for their financing needs or for expert business consulting.

Advantages to owning multiple properties in one market:

• You already know the local market. Adding a second property in the geographic area you know means you don’t have to research new markets. Most likely, you already know the demand generators. You also know the typical customer breakdown (corporate, group, leisure, etc.)

• Different Products for Different Customers Offering two different hotel flags means that customers have choices. In addition, marketing can often go further if customers are utilizing franchise loyalty programs. And you can emphasize different aspects of each property to reach a variety of customers.

• Staffing synergy: Staffing can be a challenge. Therefore, multiple properties allow for fuller employment. And management-wise, you do not have to duplicate efforts in terms of supplies, payroll and accounting.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Minnesota Hotel Loan Closes Quickly

Our clients are very experienced hotel owners and know the Minnesota market very well. They are excellent managers and are hands-on in all of their properties. But they needed assistance to find a lender willing to close a Minnesota hotel loan quickly. The reason: a 1031 exchange.

They contacted Senior Associate Ryan Dumas in order to complete the purchase of the land and the business at this suburban Minneapolis location.

Ryan worked with our team at top speed to get the loan out to lenders willing to close quickly. Ryan said, “These clients were really organized and ready to make this Minnesota hotel loan happen. We needed them to be extra responsive so we could utilize the 1031 money. It was a smooth closing, and they are owners of another property that will be very profitable under their management.”

1031 Exchange FAQS:

• What’s a 1031? A 1031 is a method by which you can use proceeds of the sale of one investment property for the purchase of another similar type of property. The 1031, however, has a time limit, but it does allow you to defer paying certain types of taxes, typically capital gains.

• Who Should Help Me? You need a competent escrow and title agent, who can handle multiple closings and who can keep the proceeds from the first sale in escrow. It’s very important that the proceeds from the first sale do not come into your pocket but go directly to this third party. We also advise all our clients to hire a knowledgeable attorney for all large transactions, this being no exception.

• How should I prepare? Be ready to provide all of the documents from “your side”. These would include your personal financial statement (which we will help you with). In addition, we’ll need information about other businesses you own (depending on your ownership percentage). Our loan processing team will give you updated checklists multiple times throughout the underwriting process, so we can accomplish what we need quickly.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.