NEW YORK? When it comes to capitalization for the lodging arena, two truisms come to the fore: the first is investors are more inclined to put their money into hotel properties than hotel companies; the second is these same investors prefer to financially back quality. Divulging these twin axioms, Roger Cline, director of hospitality consulting services for Arthur Andersen LLP, opened the door for a wide-ranging panel discussion of ?Pushing The Financial Envelope: Alternate Financing Strategies,? at the recent 22nd Annual New York University International Hospitality Industry Investment Conference held here. First through that door was a request that the high-profile half-dozen members of the panel explain how, if at all, the current lending climate differs from years gone by. ?Looking at it in a macro sense, in certain aspects it might be accurate to say nothing has really changed,? noted Edward Carey, managing director for the real estate investment banking group of CIBC World Markets. ?Public equity markets are still basically closed, and that of course impacts the debt markets. However, the truth is there is lots of private equity available out there right now.? ?One difference I see that?s particularly applicable to this industry is flags realizing they need to step up to the plate; they need to participate in the overall financing process,? said Scott Butera, executive director for UBS Warburg?s real estate group. ?They just can?t afford to wait for things to get better or work themselves out on their own.? Another perspective was that offered by Rodrick Rohrbach, senior vp for Credit Lyonnaise. ?Most lodging companies today now have to pay over 10% if they expect to issue new bonds,? he said. ?And one thing is certainly clear in today?s bond marketplace: no one wants to take on Alan Greenspan.? Andrew Strasser, vp at Lend Lease Real Estate Investments, aired a different point of view. ?Underwriting has become more difficult as those charting the future course of the marketplace continue to become more cautious.? The panel generally agreed that money has not been forthcoming to the hotel industry as easily as it had as recently as a year ago. Perhaps part of the reason, as espoused by G.E. Capital Corp.?s David Henry, senior vp/CIO, is that a growing amount of money ?is lately being put to work overseas.? Or, as Melvin Mandelbaum, managing director of the Bank of Nova Scotia explained: ?Hotels are definitely facing a more conservative lending environment, primarily because of those banks that do handle real estate, only a sub-set of them seem willing to lend to hotels. Additionally, he said, ?even they?re looking to limit their business dealings to highly experienced hotel owners.? Then again, as Carey maintained, consolidation within the banking ranks has impacted the situation as well. ?It?s important to realize that some of the bigger [banking]players are no longer in the game.? And with more banks caught up in the merger/acquisition avalanche everyday, he said that relationship banking has diminished markedly. Mandelbaum noted that because of the cyclical nature of the industry, many lenders are afraid they?ll be stuck with the long-term deals they make today if, in fact, the market or the economy changes dramatically. As for factors impacting financing decisions on new hotel development, Butera noted typical considerations include the quality and amount of the equity involved, the competitive position of the participating flag and the physical location of the proposed project. Picking up on this assessment, Henry pointed out that it?s not out of the question for developers to finance ?60% to 70% of the total cost of a well-thought-out project,? while Mandelbaum noted that the increasing involvement of a flag is regarded as a positive factor in the quest for funding. On the other hand, there was also a negative side to the tales related by the panelists. For starters, many came armed with sharply focused ideas abou
