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Commercial Loan For Your Hotel Property}

Commercial loan for your hotel property

by

John Berardino

Getting a commercial mortgage for a hotel property is very similar to getting a commercial mortgage for an owner occupied commercial property with a few subtle differences. The driving force for the majority of most hotel income is the RevPar or revenue per available room. RevPar is most commonly calculated by multiplying a hotels average daily room rate (ADR) by it occupancy rate and is a key indicator of performance. Rising RevPar is an indication that either occupancy is improving; the ADR is increasing, or a combination of the two.

Although RevPar only evaluates the strength of room revenue, it is typically the most relevant indicator of performance. While many full service hotels generate revenue through other means such as restaurants, casinos, conferences, spas, or other amenities the majority of hotel properties are either limited service flagged properties or limited service unflagged properties. A limited service hotel is simply a hotel with out a restaurant. Because the operating costs of the restaurant component generally run higher than that of the hotel operations, it is common for the net operating income (NOI) as a percentage of total sales to be lower for a full service than a limited service hotel. For this reason the majority of commercial lenders prefer to finance limited service hotels.

Flagged vs. Unflagged Properties:

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A flagged hotel property is simply a hotel that belongs to a national franchise. An example of a flagged property would be a Holiday Inn or a Best Western. For the guest, a flagged property provides the benefits of a uniform standard that is upheld by the franchisor. A guest could stay in a flagged property on the east coast and could expect the same flag on the west coast to have the same standard of cleanliness and amenities. The owner of the property gets the benefit of a nationwide reservation system and marketing. For this benefit the operator is expected to pay a franchise fee which can typically range anywhere from 5% to 10% of room revenue. Because of the advantages that a flagged property has, most commercial lenders prefer to finance them over an unflagged property. Sometimes it can be extremely difficult to get a commercial loan for an unflagged property, especially if the property isnt in what is considered a destination resort area. A destination resort area would be an area like Miami, Myrtle Beach, or Orlando FL. An unflagged property in a destination resort is easier to obtain a commercial loan on than an unflagged property in other areas of the country.

Exterior Corridor vs. Interior Corridor:

An exterior corridor property is a hotel property where you can actually see the door to the rooms from the exterior of the property. These are sometimes referred to as a motel instead of a hotel. The term motel is actually derived from the term motor hotel where most travelers would park their vehicle directly in front of their room. While there are disagreements between what defines a motel and what defines a hotel, there is typically very little difference between the two outside of a lenders perception.

Most exterior corridor properties are older and subsequently will not have the quality of furnishings and will have more deferred maintenance than an interior corridor property. An interior corridor property is going to be more energy efficient and would have a lower utility expense as a percentage of gross revenue.

Financing Your Hotel Property:

When trying to get a commercial loan for your hotel property there are a few distinct differences you can expect as opposed to financing other commercial properties. A hotel property is considered special purpose in nature which simply means that it is generally cost prohibitive to convert it to alternate use. An office building or retail space can accommodate numerous types of businesses whereas a hotel property can only accommodate a hotel. Because of this a commercial mortgage for a hotel is going to be considered riskier to the lender than a commercial mortgage for other general purpose property types. A lender will mediate this risk by taking a more conservative approach to underwriting a hotel property.

The loan to value (LTV) for a hotel property will be lower than other general purpose property types. For a limited service, flagged property 65% LTV is typical and that number can go down depending upon the age of the property and whether its interior or exterior corridor. The LTV is simply a ratio calculated by dividing the loan amount by the value of the property. The debt service coverage ratio (DSCR) for a hotel will also need to be higher than that of a general purpose property type. The DSCR is a ratio that determines the strength of the property or business income in relation to the proposed mortgage payment. A typical required DSCR for a hotel property by a commercial lender is 1.30 which simply means that for every $1.00 in proposed mortgage expense there should be $1.30 available to pay it. For other general purpose property types the DSCR is lower. A DSCR of 1.20 is common for general purpose property types and can go oven lower for a less risky property such as an apartment building.

Because the acquisition of a hotel property under a conventional program requires a large capital injection, many borrowers prefer to purchase a hotel property by utilizing the SBA 504 program. This program enables the borrower to put in as little as 15% and still obtain a better interest rate than a traditional commercial mortgage for a hotel.

This article has been provided courtesy of commercialmortgage.net. Commercial Mortgage is a

Hotel Commercial loan

division of Griffin Capital Funding offers hotel loan and

hotel financing

with no personal guarantees, favorable loans rates and good terms.

Article Source:

eArticlesOnline.com

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Analysis Led Lighting Industry In China Development Characteristics

By Himfr Mary

From a market perspective, China LED companies have the following characteristics:

LED lighting industry has developed rapidly. LED lighting has already begun in 2010 fermentation, with the increased demand in 2009 compared to the market, do LED packaging, LED display enterprises have entered the field of LED lighting. China LED package on the market only very few number of companies, most companies have started to do packaging development and production of LED lighting products. LED applications has become increasingly blurred boundaries of the enterprise, the enterprise LED product line becomes longer. Although the technical level of products compared to previous years LED technology has been greatly improved, but the majority of enterprises in terms of prices? Leading the market at the expense of product quality, but also led to the gradual decline in product margins. However, quite a number of companies began to improve LED investment, to the high-tech and high added value, intelligent product direction. In the package and the application side, some of the products of individual enterprises and the international LED manufacturers already competing against. Even so, but the LED chip, low-profit enterprises as a whole. LED chip companies currently spend a whole lot, but the LED chip industry sales in 2009 only 20 billion yuan, and most of the LED chip companies with negative profit or no profit. LED chip companies up to 62 in late 2009, with the LED chip companies and Taiwan, large-scale investment in technology introduction, the next few years, China will have a very large LED chip development.

Occupy an important position in the export and domestic market is weak, especially in the Pearl River Delta LED business, many companies accounted for more than 50% export ratio. Mainly because of LED product prices relative to Chinese consumers remains high, the Chinese LED application products sold mainly in commercial lighting and municipal engineering, general consumer acceptance is still low. LED mergers among enterprises is rare. Little LED on the market today and among enterprises? Cases, companies were basically on its own scale. Relative to the market, thousands of enterprises, between enterprises and? Negligible proportion.

LED market is still mainly immature and full competition, most companies can find their own living space. However, relative to the chief? Recombinant small number of cases, the Chinese LED industry to enter and exit each of the business very much.

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Brand building delay

Needless to say, the brand is to overcome the crisis through a difficult steel armor, so to enhance the lighting industry in crisis, the anti-risk ability, we must work hard in the development of the brand, to create a unique lighting brand development.

Implementation of the multi-brand strategy, many companies that implemented in a multi-brand operation, a variety of sales and marketing between brands is entirely separate from, but its organization and management development, production and sharing of resources, which undoubtedly optimized resources, making full use of corporate resources.

Different positioning of products to fight for greater market segmentation cake lighting industries, so that the entire market share increased. Not only expand the company’s influence in the industry, the enterprise is to achieve maximum benefits.

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