SBA 504 Hotel Feasibility Study in Idaho

Hotels in Idaho 504 lending, with a large franchise share

Hotels and motels take 5 of 39 places among Idaho's SBA 504 classes. Across FY2017 through FY2026 the program logged 26 hotel and motel loans for $48.8 million, a count that places Idaho at 32 among states. The median of $1.7 million is 0.81x the national 504 mark, with the middle of the loans between $725,500 and $2.7 million. Franchise share is 42.3%, well below what 7(a) hotel lending in Idaho shows, a reminder that the two programs are used differently.

Development companies

Capital Matrix, Inc. is listed with 9 loans and $19.2 million, a large average. Region IV Development Corporation is listed with 6 loans and $6.8 million, and, with 5 loans and the same $6.8 million, Eastern Idaho Development Corporation. SBA lists present holders, which reveals who holds the loans and nothing about their terms. Ada County has 7 loans and Bannock 6, with Custer, Kootenai and Twin Falls at 2, and single loans in Canyon, Cassia, Clearwater, Franklin and Latah.

A front-loaded record

FY2017 had 7 loans and $15.9 million, by far the biggest year, then FY2018 had 4 loans and $4.3 million, and FY2019 had none. Later years run between 1 and 4 loans, with FY2024 at 1 loan of $620,000, FY2025 at 2 loans and $6.0 million and FY2026 at 1 loan and $4.9 million. A borrower should not assume the early pace has returned. For Idaho hotels financed this way, no cancellation or loss percentage is given, as the cohort is thin. Hotels and motels share a code, which mixes limited-service and full-service properties.

What an Idaho hotel loan study must test

A 504 hotel loan funds real estate, so the study must prove the site and the product: land, construction or purchase price against comparable lodging sales, and the type of property the market will support. Demand should be built from travel generators near the site, such as business, recreation and highway traffic, with a month-by-month view of occupancy and rate and a clear statement of the competitive set. Operating margin after management, brand fees and reserve for replacements shows what is left to pay the loan. A downturn case and a lost-flag case should both cover the payment, and an appraiser should address how the hotel would be valued by another operator.