A Lending Checklist

A Lending Checklist

Reprinted from Advanstar
Hotel & Motel Management Magazine
By Jeff Wilder
Wilder Group, L.L.C.

As conservative hotel mortgage financing outlets widen in availability, articles trumpeting the spigot opening are taking up more and more printer's ink. O.K., o.k. we believe that the money is out there, but what do you need to supply to the lender in order to actually close a loan once you've found one interested in looking at your deal?

Those of us who've been through the lending process know that it is a tedious, often frustrating, but necessary gauntlet that requires the gathering of an extraordinary amount of detailed information. Tax returns, financial statements, clean (or mitigated) environmental reports and appraisals are just the beginning.

Lending activity now takes place under the watchful eye of underwriters, bank examiners, public rating agencies, tiers of management committees and the like. Most of these folks remember, all too well the most recent asset devaluation real estate debacle which in retrospect, includes much in the way of sloppy lending practices. Properly, the lending community is being very responsible this time around. What it means for the borrower is that he's got to provide a host of detail to the interested lender.

Here's a checklist for your pocket, or file, that provides most of the categories that lenders will need to receive and review during the underwriting and closing process.

Hotel ownership history, including form of ownership, listing of individual owners and their percentage, relevant agreements (such as shareholder or partnership documents) and years involved in the property.
For all people, or entities, owning in excess of 20% of the subject asset, a detailed list of other properties that they own (probably including 3 years of financial statements and/or tax returns), together with their personal tax returns.
3 years of financial statements and tax returns on the subject property's owning/operating entities. CPA financial compilations, as opposed to reviewed or audited, financial statements, may be insufficient.
Resumes of principal owners.
Proposed use of funds.
Schedule of all current property or business obligations and encumbrances including mortgage notes, leases, franchise contracts, management agreements, leases and the like, together with the back up documents.
Complete F, F & E inventory.
Updated title report.
Latest franchisor reports on the hotel, including PIP's and quality assurance reports.
Property survey.
Architects letter verifying compliance with the American for Disabilities Act.
Engineer's report on building's structural integrity.
Satisfactory environmental report; usually a Phase One Study is adequate.
Termite inspection.
Opinions of Counsel.
Evidence of insurance.
Pay off letters from creditors whose debts are being satisfied with the new funds.
Evidence of zoning compliance.
An appraisal - don't do this in advance. Each lender wants the final say in who is chosen.
All hotel licenses.
Verification from taxing authorities that the hotel's various taxes are current.
Detailed financial projections.

Your ability to professionally and expeditiously access this material is vital to the underwriting process. Your cooperation with, and understanding of, the lender's needs will greatly assist the process and expedite in closing that loan you'd like to have funded. I'll be pleased to share my borrowing experiences with you, if you'd like to call me at 1-212-541-4500.