Why banks haven’t fully reentered the refi market

Editor’s note: Based on our perception of the increased volume of hotel refinances over the past few months, Hotel Investment Today asked several brokers and debt players about the state of the market. This is part 2 of a series that features Arriba Capital’s Ryan Bosch and Access Point Financial’s James Reivitis. Click here for Part 1.

NATIONAL REPORT — Coming into 2025, many expected this to be the year that banks reentered the hotel finance market meaningfully for refinances and acquisitions. But the rebound has been more muted than anticipated, according to Arriba Capital’s Ryan Bosch.

Ryan Bosch

“Regional and local banks are still lending, but mostly on smaller, relationship-driven deals. National and international banks have continued to retreat,” said Bosch, principal for Scottsdale, Arizona-based Arriba Capital. “Private credit remains the most consistent source of capital, especially debt funds and investor-driven lenders focused on transitional or higher-leverage executions. CMBS made a strong push in Q1, accounting for 45% of all hotel originations in 2024, its highest market share since 2017. But recent tariff-driven volatility has thrown pricing into question and slowed the pace of new issuance.”

Bosch said life insurance companies, typically limited participants in hotel lending, may increase their allocations this year, but their bigger role is behind the scenes.

“Many are now backing debt funds, helping fuel the growth of private credit. This influx of institutional capital has added depth to the market and, in many cases, compressed spreads among private lenders as they compete for higher-quality deals,” he said.

With so much dry powder chasing yield, the real question going forward is: Will there be enough demand, and enough viable deals, to absorb all the capital that’s been raised?

Ryan Bosch

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But the influx of private credit isn’t a permanent solution for hotel finance, Bosch said.

“Private credit is not a replacement for traditional lending when it comes to stabilized hotel assets. While it’s been a competitive and much-needed solution in today’s market, its cost of capital is still too high for many long-term hold strategies,” he said. “With so much dry powder chasing yield, the real question going forward is: Will there be enough demand, and enough viable deals, to absorb all the capital that’s been raised?”

While private credit is keeping the current market moving, Bosch said, “it’s still a bridge, not a foundation.”

When asked why hotel refinance deals are failing, James Reivitis, chief development officer for Atlanta-based Access Point Financial, said companies like his do a lot of work upfront to try and prevent that from happening. When refis do fail, though, generally speaking, he said it’s because of the quality of information provided, or lack thereof.

“We stress to our borrowers that communicating the challenges (or strengths) of their property and the ability to achieve and/or maintain their operating income is paramount,” he said. “After a failed refinancing (not achieving the loan proceeds required), generally speaking, borrowers need to explore equity cash-in to reduce the senior loan proceeds to a level the property can support or explore a sale.”

Hotel Investment Today asked Bosch and Reivitis about the number of refinances they have executed in 2025 compared to a year ago and what a typical debt stack looks like these days.

James Reivitis

Hotel Investment Today (HIT): Have you completed more refinances in the first 3.5 months of 2025 than in the same period in 2024?

Ryan Bosch: Yes, we’ve seen a sharp increase in refinance activity and volume is up roughly 40% year-over-year. Many borrowers sat on the sidelines throughout 2024, expecting interest rate relief that ultimately never came. With debt maturities now pressing and limited flexibility left, we’re seeing a wave of groups return to the market. Some proactively, but many because they’ve run out of time. There’s a growing sense that waiting any longer is a bigger risk than locking in today’s terms, even if they’re not ideal in the eyes of some borrowers.

James Reivitis: The bulk of APF’s financings have been refinances from debt maturities. We are very active right now. In 2024, APF directly funded approximately ~$0.5 billion of bridge loans. In the first 3.5 months of 2025, we have already exceeded that figure when you consider closed transactions and what we have under-executed term sheet.

HIT: What does the typical debt stack look like today on refinances? 

Bosch: We’re seeing LTVs around 65% across the board for stabilized assets, with some lenders, particularly regional banks and credit unions, willing to stretch to 70% on smaller loan sizes. On the other end of the spectrum, for properties going through a transition or facing a significant PIP or deferred capex, we’re seeing debt funds push leverage up to 70% and, in select cases, even 75%. But in today’s market, LTV isn’t the primary constraint... It’s in-place debt yield and whether the lender buys into the pro-forma business plan post-renovation or repositioning. If the cash flow story isn’t compelling, the leverage won’t follow.

We do not see a lot of preferred equity or mezzanine used in middle-market riffs yet. From our perspective, there’s more capital chasing those positions than real deal flows to support them. In many cases, we’re finding that stretch senior debt funds offer a more attractive cost of capital than blended bank and pref or mezz. The bottleneck isn’t capital, it’s conviction. Lenders need to believe the turnaround story or the resilience of the in-place cash flow; right now, that bar is high.

The bottleneck isn’t capital, it’s conviction. Lenders need to believe the turnaround story or the resilience of the in-place cash flow; right now, that bar is high.

Ryan Bosch

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Reivitis: In this environment, where value is so uncertain, the real driver of the debt stack for APF is a combination of in-place and projected debt yield, which we find to be the most meaningful metric. Although LTV and LTC are important, we spend a lot of time working with our sponsors to understand their assets’ story and how they will achieve their pro forma in the next 12-24 months.

HIT: What is the main reason for most of the refis you are seeing?

Bosch: The most significant driver by far is loan maturity. 2025 marks a record year for hotel debt coming due, and the “extend and pretend” era is largely behind us. Lenders are less willing to grant extensions and borrowers can’t afford to wait for perfect rate conditions that may never materialize. Many of the groups who delayed refinancing in 2024 are now facing hard deadlines and stepping back into the market with a more pragmatic view.

At the same time, we’re seeing a growing subset of refinances driven by value creation, i.e., post-renovation, post-ramp, reflagging, or post-construction completion. These deals are often about locking in long-term financing, cleaning up the capital stack, or taking some equity off the table. Most refinances aren’t opportunistic; they’re deadline-driven. But smart borrowers are getting ahead of what’s likely to be a crowded and competitive refinance environment later this year.

Reivitis: Existing debt maturities are the main driver.

HIT: Can you offer an example of a typical (or atypical) deal with rate structure/terms for a recently closed refi?  

Bosch: The first was for a limited-service hotel in a core Texas market. The property was well-stabilized with strong in-place cash flow, and the sponsor was seeking to recapitalize and pull out equity following several years of consistent performance. We placed the deal with a regional bank that offered a 10-year loan at 70% LTV, fixed for the first five years at 6.18%. The structure included meaningful cash-out. We’re seeing this type of execution more frequently among credit unions and regional banks that are looking for clean, smaller-sized deals in established markets.

The second refinance was for a full-service hotel located in a high-traffic airport submarket in the Northeast. The property was coming out of a major renovation and hadn’t yet stabilized, which made it a tough fit for the permanent, non-recourse market. We arranged financing through a debt fund that was comfortable with the business plan and the market fundamentals. The loan was sized to 65% of the as-is value and priced at a spread of 325 basis points over SOFR, structured with interest-only payments for the full term. This type of execution is typical of what we’re seeing from debt funds, targeting transitional assets in strong markets where they can get paid for taking on ramp-up risk.

Reivitis: Typically, we offer up to five years of term for our floating-rate loans with rates in the SOFR+Mid 400s to SOFR-Mid 600s. Every deal is different and we have a lot of flexibility for the right sponsors.

HIT: Where are interest rates trending today and what are your expectations for the next 90 days?

Bosch: In this market, rate forecasts age about as well as unrefrigerated milk. While there is optimism around a potential Fed cut in June, the bigger challenge has been the volatility in the Treasury market itself. Even small movements in the index have created significant shifts in loan pricing, making timing tricky for borrowers.

The other piece to watch closely is credit spreads. If recession concerns gain momentum, spreads could widen, particularly in the securitized and private credit markets. The real story isn’t just what the Fed does, it’s how the market reacts. Volatility in the index and risk-off sentiment in the credit markets directly impact where deals get priced.

HIT: What entities are most active in the debt market right now? Are there any trends in who will provide more capital in 2025?

Reivitis: Entities like ours, which are non-bank private capital, will continue to be very active this year. I encourage borrowers to seek out lenders they know will be there for them at the closing table and who also understand the nuance of hotels.