Large Gulf Coast Hotel Loan Closes for Conversion

Our clients wanted to buy a large hotel on Florida’s Gulf Coast and convert it into a dual brand property, with standard guest rooms on one side and extended stay suites on the other. The two brands would share a building, a staff and a management team, while giving travelers two price points to choose from. They needed a construction to permanent loan to cover both the purchase and the conversion work. At $16.5 million, it was no small project.

A purchase this size comes with a deeper file. Our clients are experienced operators with ownership interests in more than a dozen affiliated businesses. That is a strength in credit, and it also means a long document list.

Credit was never what held this loan up. The financing came together and the bank was ready to fund. Then a question came up that very few buyers think to ask before they sign a contract: how many rooms does the hotel actually have?

The building’s plans and the county’s records did not agree. Where two guest rooms connect through an adjoining door, the county counts the pair as a single permitted unit, while the plans count two sellable keys. Both records were accurate. They were simply counting different things. However, until the two were reconciled, a bank that wanted to lend could not close.

Rick Patel, GRP Capital President, commented, “This was a large loan and none of the difficulty was in the credit. The borrowers are experienced operators and the bank wanted the deal. What stopped us was a difference between how the plans counted rooms and how the county counted units. Our team and the borrowers’ team worked that record down together. Large hospitality loans take patience and a great deal of coordination. I was very pleased with how everyone stayed with this one, and it showcased our GRP Capital team’s ability to handle and close a complicated transaction.”

Buying a hotel that you intend to convert is a different exercise from buying one you intend to operate as it is. You are underwriting the property you will have, not only the property you are standing in, and the public record has to support both. Here is what we would tell any buyer considering a conversion.

Before You Buy a Hotel You Plan to Convert:

• Confirm how the municipality counts your rooms: Your franchise counts sellable keys. Your county or city may count permitted units, and those two numbers are not always the same. Connecting doors, converted storage space, and suites that were once two rooms can all move the count. Ask the planning department what is on record before you are under contract, not after your lender has issued a commitment.

• Pull the permit history early: Work that was never formally closed out does not go away. Expired permits and small open items from years before your purchase will surface in the lien and title search, and each one has to be reopened and closed out before a lender funds. These are usually easy fixes. They are also usually found late, which is what makes them expensive.

• Order the environmental report right away: A Phase I is a gating item, which means nothing closes without it. Order it at the front of the process. Most findings turn out to be minor housekeeping matters with a clear path to resolution, but only if there is still time on the calendar to walk that path.

• Start the affiliate package the day you sign a term sheet: Lenders underwrite the whole borrower, not just the property. If you hold interests in other businesses, expect to produce returns for all of them, generally for two years, plus statements. This is almost always the longest lead item in the file. Begin it immediately and send it in organized batches rather than waiting to submit one perfect package.

• Leave room in your schedule for a municipal answer: A bank can move in a day. A county moves on its own calendar, and urgency on your side does not change that. When your closing depends on a local government confirming something, build the timeline around their pace and keep a second approach ready in case the first one stalls.

More information on hospitality loans

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.