Lenders: Trump’s business approach creates pros, cons
 
Lenders: Trump’s business approach creates pros, cons
21 DECEMBER 2016 9:23 AM

Part two of Hotel News Now’s three-part year-end series of articles has lenders giving their thoughts on what the election of Donald Trump as U.S. president means to the lending environment. 

Editor’s note: This is the second installment of a three-part series that brings to a close Hotel News Now’s “Lender Insights” feature. HNN reached out to participants of the monthly feature during 2016 to learn their views about three key issues: a look back at lending in 2016; how the election of Donald Trump might affect lending; and what advice they have for borrowers in 2017.

Today’s question: How will the election of Donald Trump as president affect the lending landscape?

Pelvi Chavda de Vries,
SVP of business development,
Access Point Financial
“As the owner of numerous hotels around the world, Trump has extensive experience in the hospitality industry. At this time however, it is uncertain what the election results will mean long term for the U.S. lending landscape. Until Trump lays out his economic plan, tax policies and legislation plan, the high degree of reservation surrounding the impact on financial institutions will continue well into 2017.”
Mathew Crosswy, president,
Stonehill Strategic Capital
“As we know, Donald Trump is pro-business and understands the importance of access to capital in commercial real estate. Donald Trump ‘wants’ to make sweeping reform with some of the regulations in Basel III (regulatory framework on bank capital adequacy, stress testing, and market liquidity risk) and attempt to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act. He believes returning power to main street banks will spur economic growth. In short, Trump's reduction in regulation, pro-growth policies, pro-business policies, and both houses of Congress also controlled by Republicans, will lead to unchecked growth, inflation and higher interest rates.”
Neil Freeman,
chairman and CEO,
Aries Capital
“In the short run, there won’t be much change in the lending market. In two to three years, if bank regulations are loosened, then smaller banks may get more aggressive in making real estate and hotel loans.”
Mike Muir,
EVP of hotel lending,
Live Oak Bank
“The primary driver of change will be rising interest rates, which will negatively impact property values and economic feasibility of new builds. If the administration changes tax rates, that may also alter the landscape. Decreased capital gain rates could lead to an active acquisition market.”
Rick Rogovin, VP,
Wells Fargo's Hospitality Finance Group
“The jury is still out. The new administration has been clear about investing in infrastructure (i.e. airports, roads, etc.), which could result in strong job growth. Additionally, potential corporate tax reform could result in higher profitability, leading to increased capital investment. Increases to both public infrastructure projects and corporate capital spending bode well for the lodging industry. The hotel industry may also benefit from the new administration’s pro-business stance, in terms of reduced labor regulation and overtime rules. However, as a result, union activity could strengthen due to any attempt to reduce wages (minimum hourly wages and overtime pay) or decrease existing labor regulations.”
Michael Sonnabend, managing partner,
PMZ Realty Capital
“We have already seen that the somewhat surprising (to the capital markets) election of Donald Trump has been one of the factors causing interest rates to rise significantly during the past several months. Earlier in the year, rates were around 4% for a standard hotel CMBS loan, and now they are up 100 basis points or more. Part of the increase in the cost of funds was due to the Dodd-Frank risk retention rules coming into play on Christmas Eve. With the change in administration, it is a distinct possibility that the risk retention requirements will be revised or rescinded by the Trump-led executive branch and Republican controlled legislative. No matter what happens with those new rules, it is likely that we will see increasing interest rates for the foreseeable future. This will make it more difficult to refinance any of the ‘Wall of Maturities’ still requiring refinancing, as well as slow the increase in valuations brought about by historically favorable debt levels.”

Compiled by Jeff Higley.

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