Hotel Conversion Closes in the Orlando Market

Two weeks after closing the first of two Florida hotels, the same clients closed the second half of their plan: a second property from the same receivership sale, converting to a national select service brand.

A conversion is a different proposition from a purchase. The building is being bought as one thing and financed as another. Underwriting has to look past the property’s current performance to what it will produce once it carries a national flag, and that gap has to be bridged with structure rather than optimism.

The renovation reflected it. Converting the property required a $3.5 million property improvement plan, a considerably larger scope than the first property. The financing followed the same logic as the first deal: an SBA 7(a) loan of $5 million funding pari passu alongside a conventional loan, with a funded interest reserve carrying the payments through the conversion year.

The franchise side ran in parallel. The franchise disclosure document was signed with its mandatory fourteen day cooling-off period built into the schedule, so the brand approval and the loan approval landed together rather than one waiting on the other.

Projections are where hotel deals most often go sideways, and this one is a good example of why they deserve real scrutiny. We review the numbers with our borrowers and test the assumptions before anything reaches a lender.

Rick Patel, GRP Capital President, commented, “This was the second closing in a month for this client group and they earned it. A conversion asks a lender to underwrite a property that does not exist yet, so the numbers have to be defensible and the brand timeline has to be real. Our team spent its time on the projections and on the paperwork, because those are the two places these deals actually break. The financing structure was the easy part once the rest was solid.”

Converting a hotel to a new brand changes what a lender is underwriting. Here is what owners should know before they start.

Converting a Hotel to a New Franchise Flag:

• The lender is underwriting a property that does not exist yet: Current performance tells them where you are starting, not where you are going. Expect them to test your post-conversion assumptions hard, and expect to defend them line by line.

• Build the franchise timeline into the loan timeline: A franchise disclosure document carries a mandatory fourteen day cooling-off period before you can sign. Sequence it alongside underwriting rather than after, or the two calendars will collide at the worst moment.

• Size the renovation honestly: A conversion PIP is usually larger than a brand-standard refresh, and it is the number most often understated at the start. A scope that grows after closing is a funding gap you will have to cover yourself.

• Test your own projections before the lender does: Growth assumptions that do not match the revenue lines beneath them, and reserves that do not match their stated percentage, get found in underwriting. Finding them first is faster, and a conservative model that survives scrutiny is worth more than an optimistic one that does not.

• Check every signature before the package ships: An unsigned document discovered at closing is pure delay. It is the least interesting reason to miss a date and one of the most common.

Why Choose GRP Capital?

Our GRP Capital team specializes in crafting financing solutions tailored to each client’s unique goals. We even have experience with lender dropouts and critically timed funding needs.

Whether you’re purchasing, refinancing, or building from the ground up, our extensive network of lenders ensures you’ll find funding that aligns with your goals and cash flow needs.

Here’s what sets us apart:

• We save you time by researching and identifying the best funding options for your project.
• Our expertise spans various loan products—including non-recourse loans, SBA loans, bridge loans, and conventional financing—so you can navigate even the most complex transactions confidently.
• Beyond lending, we provide strategic guidance on operational decisions that drive long-term business success.