Hotel Valuation Question
How would you calculate the true value of a hotel and at what level of proceeds to lend at?
Currently projecting a negative NOI for 2020 and a slow recovery starting in 2021...
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There are a lot of factors a lender is going to look at but the two most important from a loan sizing perspective are 1) stabilized debt yield and 2) stabilized LTV. These metrics provide a measure of the ability for the borrower to refinance upon stabilization.
Rule of the thumb is 11%+ stabilized DY and 65% stabilized LTV. In today's market that is the bare minimum. Most lenders will require more conservative constraints.
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