Despite industry jitters, AFC arranges financing for several hotels.

Few industries have been more affected by an unstable economy and current economic hardships than the hotel sector. As a result, many prominent lenders have grown increasingly reluctant to provide financing for lodging facilifies.

In particular, financing institutions are extremely hesitant to provide capital for construction of new or unstabilized hotels. Lender concerns have forced mortgage bankers and investment firms to develop new and creative methods to obtain financing.

Such is the case for AFC Realty Capital. The Manhattan-based real estate investment firm has utilized innovative financing methods to consummate some difficult financing transactions for new hotel developments.

The key to obtaining capital is layering each piece of the capital structure together so that the completed capital stack can meet the owner's needs.

In order to secure financing for the construction of new and unstabilized hotels, the property must posses attributes which enable it to rise above its own difficult marketplace. By highlighting those attributes we can structure a deal which benefits both the lender and borrower.

For example, in the beginning of 2003, AFC secured interim financing for a suburban Boston hotel property which had only been open 10 months, but whose construction loan was coming due with no extension opportunities.

In this transaction, we utilized creative structuring which include the use of mezzanine financing to enable the owner to repay his construction loan and to draw additional loan proceeds during the new loan term as cash flow and value of the property increased. A major contributing factor to the lender feeling more comfortable providing capital was the property's extremely desirable location and the mezzanine lenders position in the capital structure (i.e. ,not greater than 85% loan-to-value).

While AFC has been successfully arranging loans for the construction of hotels, the firm also continues to employ innovative practices to secure financing for more established lodging facilities.

AFC recently arranged $22 million in financing for a 357-room Holiday Inn Select located at Capitol Plaza in Atlanta, GA. The loan was used by the owners of the building to complete the purchase of the hotel, as well as pay off existing debt.In this case, the original owning entity of the property was forced into foreclosure and subsequently filed for bankruptcy. Our client approached us to secure funds which would enable them to complete a previously negotiated settlement to purchase the property.

We were able to structure a deal, which provided the borrower enough capital to acquire the hotel. What's more, we were able to utilize a lender who could commit to the transaction within 10 days to satisfy the requirements of the bankruptcy court.