As the majority of the nations start “reopening,” the financial markets are also beginning to reopen. However, appetite lenders / investors have limited accommodation funds. The focus of our customers will be on asset management for the next few months both in terms of property management and in working with lenders to “be here for the next year.” PMZ has been involved in helping hotel owners obtain a number of short-term relief structures for their properties. These typically include postponement of interest payments from balance sheet lenders to approval of secondary debt and the use of CMBS-lending reserves.
We have often worked with a range of portfolio lenders to finance our customer loans in order to generate capital to reinvest and rebalance portfolios through the sale of hospitality loans. Such loans were typically for the production of properties. Until the market clarifies more regarding the volume of really impaired hotel loans it is unlikely that the volume of transactions in non-performing loan sales will be significant. Fitch reported that over 5,000 main-balance loans amounting to over $120,000,000 are either defaulting or requested special servicers changes. It’s too early to say if special agents are willing and/or able to work on any of these requests.
The latest debt market will continue to be fairly illiquid throughout the summer. Because of the lack of sales and standardized TTM transactions, lenders are unable to comfortably value assets. Balance sheet lenders who have provided most of their portfolio with summer delays will not be able to issue new loans on conditions that borrowers find appealing. On the positive side, subordinated debt (rescue capital) will begin to enter the market earnestly when borrowers prepared to reopen the capital market for hotels for a more active fall financing season.