Acore Capital Raises $1 Billion To Make Rescue Loans to Hotels

Acore Capital has raised $1 billion to make rescue investments in North American hotels, as lodging owners seek new and often expensive capital to bridge the latter stages of a pandemic.

Acore, a commercial real estate lender with $17 billion in assets under management, is launching the strategy to originate and acquire senior loans, mezzanine debt and preferred equity. In many cases, it will seek owners who have exhausted their ability to win forbearance on existing debt, managing partner Warren de Haan said in an interview.

“We’ve come to an inflection point where lenders have no more to give, and borrowers have no more to give,” de Haan said. “We are here to say, ‘We like the rebound characteristics of your asset. We want to provide you with the recovery capital to get you to the other side.’ ”

Last year was the worst on record for the U.S. hospitality industry, with occupancy rates at 44%, according to lodging data firm STR. Roughly 20% of hotel loans financed with commercial mortgage-backed securities are at least 60 days delinquent, according to a Feb. 11 report from Moody’s Analytics.

“There will be a small bounce this summer due to pent-up leisure travel demand, but the return to ‘normal’ is going to be slow,” Moody’s economists wrote. “Metro areas with low economic potential, as well as some major conference and business centers, will suffer.”

Lenders have been patient so far, preferring to modify loans over taking ownership of money-losing properties. Government stimulus has helped as well, while the accelerating pace of the U.S. vaccination campaign has given owners hope that the end is in sight, and sent them looking for new capital. In one example, Ashford Hospitality Trust arranged $450 million in rescue financing from Oaktree Capital Management at rates ranging from 14% to 18.5%.

De Haan, whose firm has originated more than $4 billion in existing hotel loans since its inception in 2015, said that those rates are in line with the terms Acore would likely extend for mezzanine loans or preferred equity.

Whether hotel owners can hold onto their assets will depend on their ability to win more forbearance, or to find a lender to inject new capital into a property. In some cases, a hotel’s value has been too greatly impaired to warrant new investment.

“Those keys are going to go back to the banks,” de Haan said.

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