ATLANTA—Coming off a year in which it financed more than five-dozen bridge, development and CapEx loans, Access Point Financial, Inc., (APF) expects to continue that momentum during first quarter, expanding its lending platform by $200 million, and to double the amount of its transactions over the course of the year.
According to President/CEO Jon S. Wright, in a still-tight lending environment, APF is able to look out over what might now be considered a “long-term” scenario because, “we know with certainty what our capital availability is. We deal with only the highest-rated borrower profiles and don’t expect to cover all of the available market out there. We price and structure our loans very similar from one brand to the other, from economy to luxury. It is based on credit profile, market penetration, historical performance and relationships with the brands; not just on branding.”
APF was formed two years ago by Connecticut-based private equity firm Stone Point Capital and the APF management team. With a direct full-service lending and advisory platform, APF is focused heavily on branded hotels, along with independents, in the United States and Canada and is able to provide debt from $200,000 for capital expenditures up to $40 million for construction loans with brand enhancements. Among APF’s capital source partners are Wells Fargo Capital Finance (part of Wells Fargo & Co.) and Stone Point.
In keeping up the pace, APF last month provided first mortgage financing for a mixed-use project under development in Nashville, TN, by ACE Hospitality. The eight-story, $37.5-million project at 18th St. in the Midtown-West End district includes a 145-room Residence Inn by Marriott and a 100-room SpringHill Suites by Marriott. The property, being built on the site of the former Days Inn Vanderbilt, is expected to open next year.
Wright said the typical borrower coming to APF is a sophisticated, multi-unit operator “that utilizes our lending platform as an alternative to their community bank or regional bank lines of credit; they intend to preserve those lines of credit for other asset classes—they’re diversified investors, typically. Large institutions, REITs, private equity, they don’t need our money. It’s the same sweet spot we’ve had forever.”
Taylor Bennett, APF’s new VP/business development, noted the company provides an avenue for hoteliers to “get things done that they otherwise would not be able to get done” via community banks and large institutions.
Still, like many lenders who have decided to get back in the financing game more aggressively since pulling back during the economic downturn, APF is casting a “much more keen eye” on the behavior of multi-unit borrowers, particularly those new to a relationship with the lender.
“We’ve known through three very defined cycles, in which I’ve been a lender and investor in this business, how people behave in difficult times. Good behavior, candid behavior, disclosure—even if things are not trending well, we can work with that in difficult times if there are no surprises,” said Wright. “As good partners we don’t have any secrets…if someone can have the foresight to be able to tell us what could be a problem down the road, we can help work with that. We don’t want to find out after the fact that [the borrower]is in a bind.”
While not looking to be discouraging, Wright said new borrowers coming to APF need to pass scrutiny. “If their credit score is not pristine, their references are not pristine, all of their financial information is not clear to understand, it’s going to be a quick ‘No,’” he said, noting there’s been “quite a bit of creative misbehavior,” i.e., fraud, in the past few years. “We’re not in the business to understand if someone has had consistent litigation and a pattern of lender disruption.”
For those who pass muster, there are several financing tracks APF can provide. With capital-expenditure loans the lender can fund up to 100% of the cost of renovations for brand-mandated
changes. CapEx and brand conversion financing can range between $500,000 to $10 million.
For low-leveraged refinancing or acquisition paired with a renovation, bridge financing can be provided up to 70% LTV up to $10 million.
Difficult loans to get in recent years have been for new-construction projects. Indeed, a number of development projects on the drawing board were erased or put on hold indefinitely due to lack of financing when the economy tanked in late 2008. While many industry observers recently have suggested the funding drought for new development is easing, APF is still being conservative.
Although the company recently provided 65% of the total project costs for the two Marriott products in Nashville, which Wright described as a “well-conceived project in a great location,” he stressed, “As lenders, we cannot become too exuberant about what we think is a great market because in six months you could have unemployment figures released that we have no way to gauge, so if interest rates go up, there’s huge stress on cash flow on existing enterprises and the ability to maximize the loan request.”
A typical example of the financial needs APF would look to fulfil is its recent involvement with a 173-room Residence Inn by Marriott in Tempe, AZ. The new-build was developed by The Finvarb Group and is expected to open this autumn. APF’s provision of first-mortgage financing served as the base of a multifaceted capital stack.
Wright acknowledged the pent-up demand in the industry to get projects moving, whether new construction or conversion, and sees APF playing a distinct role, particularly based on existing relationships with hotel brands. He noted the company is on track to place $1 billion in hotel loans by 2015.
“The watchwords for hoteliers in 2013 are flexibility and nimbleness,” Wright said. “Until the country resolves its fiscal issues and the economy strengthens, hotel financing will remain somewhat challenging with terms that reflect current economic conditions. In order to meet guest and client expectations, hoteliers and lenders alike must be able to move quickly, creatively and prudently.”