It took a full year, but we got there. The Henley Group recently completed a discounted loan payoff for a 73-room, limited-service hotel in the Atlanta area. What initially began as a forbearance request to the Special Servicer back in April 2020 evolved into a loan reduction request as we worked through the process. The owner was able to save approximately 30% of the UPB, including principal forgiveness, 12 months of back interest, and a waiver of all default interest and late fees.
THE BACKSTORY
The Lender's original forbearance offer was little comfort to our client. The deferment of FF&E and the short-term payment moratorium did not address the reality that making P&I payments over the long run might be impossible. According to our client, the "bandage" relief granted by the Servicer was not going to mitigate the risk: the Property remained over-leveraged and the CMBS loan was going to be difficult to refinance at maturity. Despite 6 more years left on the loan term, the Borrower did not believe that the hotel's occupancy and cash flow would rebound to Pre-Covid levels. Essentially, the Property's value would never appreciate to its $10MM+ securitization value.
CREATIVE PROBLEM SOLVING
We needed to shift our thinking and create a unique approach to refinancing. The Borrower's take-out proceeds came from three sources: putting in new equity, bank financing, and securing a SBA credit enhancement. With the SBA backing, the Borrower was able to increase loan proceeds from the bank and to reduce their out-of-pocket equity. Depending on the size of a loan and an owner's willingness to sign a personal guaranty, the SBA can be an unexpected source that hotel owners may be able to tap into.
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