Shifting sands of hotel financing still allow for intelligent deals.

With the economy shoving definite signs of slowing -- due in large part to several interest rate increases last year and a deteriorating public confidence -- lenders are much more cautious today about financing hotel acquisitions than in past years.

Throughout the 90s, lenders were willing to finance new hotel development in most markets without hesitation. As a result, there was a marked increase in the number of new hotels throughout the country.

Now, at the start of a new century, there is a sense among many lenders that the hotel industry may be overbuilt. Consequently, there is a decreased appetite to fund even existing cash-flowing properties.

This does not mean, however, that no hotel transactions are being financed. Well-conceived deals are still feasible if those transactions contain a strong market position, an experienced sponsorship and an appropriate capital structure.

This is precisely what AFC Realty Capital recently provided in arranging $40.5 million in acquisition financing for the purchase of a portfolio of five nationally-franchised U.S. hotel properties. The properties, operating under the brand name "Homewood Suites," contain a total of 670 suites and are located in Billerica, Mass., Brentwood, Tenn., Bloomington, Minn., Dallas, and Farmington, Conn.

The purchaser, RLJ Development, had a severe time constraint to complete the transaction.

We consummated the deal in just seven weeks from application to closing, and also provided maximum leverage at an attractive fixed rate. In the coming year, we are confident that additional hotel financing transactions will accomplished despite changing economic conditions.