October 26, 2020
Bridge loans and preferred equity are options for hotel owners after loan forbearance runs out.
For struggling real estate owners trying to survive the coronavirus-induced recession, the saviors extending a lifeline are lenders — but whether they are white knights or acting out of pure self-interest depends on whom you ask.
Bridge lenders and preferred equity investors are in line to become the go-to rescuers for property owners, especially hoteliers and retailers that have taken the hardest hit.
They are not purely selfless, and it’s questionable whether the moniker “rescue capital” is deserved, said Miami attorney Isaac Marcushamer, who has another phrase in mind.
“I call it capital of last resort. These aren’t white knights,” said Marcushamer, a partner at Mark Migdal & Hayden. “They are sophisticated business partners. They are not doing you a favor. They are doing it to make a profit.”
Hypothetically, a hotel purchased for $30 million has a $20 million debt, and a fund offers refinancing, He said it could go two ways, either the lender gets repaid once hospitality picks up or the lender takes over if it doesn’t.