Acquiring a new property: A CMBS loan is often the best way to finance the acquisition of a hotel property. In general, CMBS lenders look for borrowers with some amount of hotel ownership or management experience. Properties will ideally be located in strong tourist markets with good historical cash flow.
Refinancing: If you currently own a hotel with an expensive bank, SBA, or hard money loan, a CMBS or conduit loan could be the perfect way to refinance it, lowering your interest rate, reducing your monthly expenses, and increasing your profit margins.
Repairs/FF&E: If your hotel needs some type of repairs or rehabilitation, a CMBS loan may be able to help finance it, but only in limited circumstances. CMBS loans often offer cash-out for refinances, which can sometimes be used for property repairs or upgrades. Sometimes these repairs are minor, but in other cases, they involve a full upgrade of a certain part of a property, such as property-wide appliance replacements, a full overall of HVAC systems, brand-new roofing, or a property-wide interior design upgrade. These more comprehensive repairs are often referred to as FF&E (furniture, fixtures, and equipment) upgrades.
However, it’s important to check your potential CMBS pooling and servicing agreement (PSA) before making any FF&E plans. This is because many CMBS lenders will not allow repairs that significantly alter the value of the underlying collateral of the loan. However, if you own multiple hotels, motels, or resorts, you can use the proceeds of a CMBS cash-out refinance on one property to pay for repairs on another property not financed using CMBS debt.
