Subject: A limited service hotel based in Sarasota, Florida.
Circumstance: The borrower, who ran a family-owned, limited service hotel, contacted Summit during the great recession when the hotel was having difficulty refinancing its maturing debt. The family had recently invested its own equity in a property improvement plan to improve both the interior and exterior of the hotel. However, as a result of the construction and the soft hospitality market, the hotel had suffered financially over the previous twelve months.
Solution: Utilizing its existing relationship and strong track record of timely closings with the existing lender, Summit was able to negotiate a discounted purchase of the borrower’s debt, which was simultaneously restructured based on mutually agreed upon modification terms. The modification called for the borrower to provide additional equity in return for a lower monthly debt service obligation, which allowed the borrower to maintain the liquidity necessary to manage the hotel effectively. The modification also provided the borrower with the opportunity to refinance the debt at a slight discount provided it was able to perform on all other terms. Finally, the modified structure provided the borrower with the flexibility of extension options in the event that it was performing on its obligations, but additional time was needed to refinance the debt. Summit was able to leverage its relationship with the bank and its experience in hospitality to close the transaction within two weeks.
Outcome: The hotel improved its financial performance as expected. However, the borrower did require the use of the extension option to demonstrate a stable financial history to its banking relationships. The borrower paid as agreed and was eventually able to arrange a conventional refinance.