Loan maturity
When the loan on your hotel or motel is coming due
A maturity date is a deadline you can see coming. The owners who do best with one start early and look at every option, a sale included.
What a maturity date means for an owner
Many commercial loans on hotels do not pay themselves off. Payments are calculated over a long schedule while the loan itself comes due sooner, leaving a balance, often called a balloon, to be repaid on the maturity date. Owners expect to refinance when that day arrives. Whether they can depends on the property's recent income, on interest rates and on what lenders are willing to do at that moment.
If a new loan will not cover the old balance, the gap has to come from somewhere: your own cash, a new partner, an agreement with the lender, or a sale.
Your options before the loan matures
Refinance
A new loan from the same or another lender. It turns on the income the property can show and the value an appraiser assigns. Start by asking a commercial mortgage broker or your banker what the property would qualify for today.
Ask for an extension or modification
Lenders sometimes extend a maturity, usually in exchange for a fee, a paydown or revised terms. It is the lender's decision and worth asking about early, in writing, with current financials attached.
Bring in capital
New equity from a partner can close a refinancing gap. It also changes who owns and controls the property, so it needs an attorney.
Sell and pay the loan at closing
In a sale, the title or escrow company pays the lender's payoff amount from the purchase price and the balance goes to you. This is the option we can help with.
A sale is not the best answer for every owner facing a maturity. If the property is healthy and a refinance is available on terms you can live with, keeping it may be right.
How a sale interacts with your loan
The payoff figure
Ask your lender for a written payoff statement. It shows principal, accrued interest and any fees as of a given date, and it is the figure that matters at closing.
Prepayment charges
Some loans charge for early repayment, through a fixed penalty, yield maintenance or defeasance. If you sell before maturity, that cost may apply, and its size can decide whether to close before or at the maturity date. Your loan documents and your lender are the authority.
Loans that can be assumed
Certain loans allow a buyer to take over the existing debt with the lender's approval. Where that is possible and useful, it becomes part of the negotiation and of the lender's timetable.
If the value is close to the balance
When the likely price is near or below what is owed, a sale needs the lender's cooperation. That is a longer and more formal process, described under hotels in financial distress.
Why timing matters more than usual
A hotel sale has stages that cannot be skipped: an NDA, a review of financials, a letter of intent, a purchase agreement, due diligence and closing. On a branded property, the franchisor must also approve the buyer. Each takes time that neither side fully controls, which is why we will not promise a closing date.
What you control is the start. Counting back from your maturity date, begin conversations with lenders and with possible buyers while you still have room to choose between them. The stages are set out on the page about how a sale to us works, and the brand's part is covered under sales of franchised hotels.
What to gather now
- The promissory note and loan agreement, including the maturity date and prepayment terms
- A current payoff statement, or at least the latest loan statement
- Trailing-twelve-month profit and loss statement
- The last two or three years of annual results
- Your most recent appraisal, if you have one
- The franchise agreement and any open improvement plan
- Any correspondence with the lender about renewal
The same package serves a refinance and a sale, so assembling it costs you nothing either way. It also lets you understand how a buyer or lender will value the property before you hear a number from anyone.
Keeping your options open
Talking to a buyer does not stop you refinancing. Many owners run both tracks until one is clearly better. If a renovation required by your brand is part of what makes refinancing hard, read franchise renewal and PIP sales. If you would rather lenders, staff and competitors not learn that you are exploring a sale, see how an off-market sale stays quiet.
A broker or an auction may also suit a deadline, each with its own trade-offs, set out in hotel broker versus direct buyer. Shorter answers are in the seller questions and answers.
Start with a confidential conversation
Tell us where the property is, how many keys it has and whether it carries a brand. We read every submission ourselves and call you back at the number you give.
Nothing you send is passed to a listing service, and sending it does not commit you to anything.
Tell us about the property
Read by the buyers. Never listed, never advertised.