Real estate crowdfunding platform Patch of Land (POL) has announced its first foray into hotels with a $3.2 million loan to a Ramada Inn located on Route 66 in Arizona.
The deal is also the platform’s largest loan to date and marks its initial foray into Arizona, the 22nd state in which they have provided a loan.
POL Senior Vice President of Underwriting and Acquisitions Doug Cochrane said the Ramada property was the perfect one to mark the company’s expansion into the hospitality sector.
“The 97-unit property, recently branded as a Ramada, has been doing really well. There’s a great opportunity and value there. The debt to service ratios are good.”
Mr. Cochrane explained the hotel operators had a lease option to purchase and came to POL to obtain financing designed to make improvements throughout the property.
Mr. Cochrane explained hotels are unique opportunities, so investors need to know what to look at when determining how attractive such investments are.
Aside from the attractiveness of the property, Mr. Cochrane said the quality of the hotel’s management team and their business experience were additional pluses.
“Occupancy rates are important, as are additional on site amenities such as a restaurant, which the Ramada has,” he said. “Physical location, its proximity to conference areas, and traffic patterns are additional considerations.”
Mr. Cochrane said POL is always looking to expand into new regions. Part of their due diligence process is having people who understand strengths and weaknesses of local economies, he added.
POL is well positioned to act on opportunities because they originate, underwrite and service their own loans, Mr. Cochrane said. This allows them to quickly deliver funds to borrowers, he added.
“We put our own money in every deal and keep it there as a sign we believe in the project. That establishes trust with our borrowers and investors.”
The combination seems to be working. Opportunities have been completely subscribed in as little as 16 minutes with an average time of 24 hours, Mr. Cochrane said.
“The bigger deals may take a little longer.”
The Route 66 Ramada, despite only being available for a few hours at the time of our conversation, was already more than one-third funded, Mr. Cochrane said.
The 18-month loan was made at 10 percent APR with a 47 percent loan to value ratio.