Insider: Investment Overview: Sale-Lease-Back - Why more and more hoteliers are drooling over this alternative
By Bryan J. Clark, President & CEO, Lion CFC Inc
Mr. Bryan J. Clark
So how are hotel owners across the globe dealing with the tightening of credit and the rippling effects of the so called “subprime mortgage meltdown?” As more and more lenders discontinue their hotel lending programs, hotel owners are finding it to be quite difficult if not impossible to get the financing they need?
As credit tightens and banks’ aversion to risk increases, more and more equity is needed to satisfy even the most aggressive banker’s lending parameters. So how are the savvy hotel owners getting the financing they need? The answer is through “sale-leasebacks.”
As more and more residential mortgage companies, life insurance companies, and pension funds feel the effects of the so called “subprime mortgage meltdown,” credit is getting tighter and traditional financing sources are drying up. More and more companies from large hotel operators to small private hoteliers are becoming more creative in their finance structures. Virtually all of the largest hotel companies and chains have begun seeking alternative capital sources, primarily sale-leasebacks.
The process of converting real estate assets into cash is a technique that has been used for decades by hotel owners who own real estate that is not essential to their core business plan and day to day operations. Expanding hotel operations into new markets or adding additional hotel brands in current markets can be extremely difficult when credit is tightening and financing is not readily available. Many hotel owners see the sale-leaseback option as the best solution. When structured properly, a sale-leaseback provides access to “usable” cash immediately while improving the company’s debt-to-equity ratio and reducing depreciation expenses, again, presenting the company in a stronger financial position.
Read more in the Hotel Business Review in my article "Investment Overview: Sale-Lease-Back - Why more and more hoteliers are drooling over this alternative.”
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Cordially,
Bryan J. Clark
President
Lion CFC, Inc.
858-602-8080
info@lioncommercial.com
