Why some refinances fail in 2025

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 Charlie Ryan of Hunter Hotel Advisors and Mark Owens of Colliers. Click here for Part 1. Click here for Part 2.

NATIONAL REPORT — When we asked brokers and debt players in the hotel refinance market why some refinance deals fail, they all said their main job is to set up a situation where that doesn’t happen.

Charlie Ryan

Still, they tell us, some deals eventually fall through.

“Value erosion has occurred in a number of markets, making refis more challenging,” said Charlie Ryan, senior vice president of capital markets for Atlanta-based Hunter Hotel Advisors. “Borrowers are forced to inject more equity, bring in a new capital partner, or accept ‘rescue capital’ with hopes that time will right the ship.”

Mark Owens, vice chair and leader of the hospitality practice group lead for Toronto-based Colliers said leverage on some older vintage products that need capital can be a constraint.

“We work proactively with our clients to ensure that the capital stack matches what the market will bear,” he said. “Some transactions may require additional equity infusions, some may require a larger piece of subordinate capital, and others may require a broader look at a portfolio and how to offset assets in need versus those that may be better received by the market.”

Mark Owens

And when those refinance options become unavailable to a buyer, hotel financial experts tell us a sale may end up being the best, or only, viable solution.

Hotel Investment Today asked Ryan and Owens 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.

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

Charlie Ryan: 2025 is off to a stronger start than 2024. It’s worth noting that Hunter launched its Capital Markets platform in January of last year, and since then, we’ve gained significant traction. We closed a number of acquisitions and refis in 1Q25, ranging from $5 to $35 million, with a strong pipeline leading into 2Q.

Mark Owens: We have seen our refinancing volume increase versus the same time last year and we anticipate this trend to continue.

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

Ryan: Most refis we are seeing are in the 65-70% range, with the senior going up to 70%. Above 70%, most mezz [preferred equity] players want to write a $10 million-plus check. So, the overall deal size needs to be on the larger end of the spectrum.

There are more lenders actively participating in each process, and thus we have more negotiating power on terms and conditions, both monetary and non-monetary. There is a rebound in the commercial bank market, both money center and regional.

Mark Owens

Share this quote

Owens: There is some LTV expansion, meaning higher leverage available. The majority of the change, however, has been the depth of the market for our offerings. There are more lenders actively participating in each process, and thus we have more negotiating power on terms and conditions, both monetary and non-monetary. There is a rebound in the commercial bank market, both money center and regional.

HIT: What is the main reason you see most of the refis?

Ryan: Most refis today are in response to loan maturities, almost all of which will be refinancing into higher-rate loans. These refis often come with PIP requirements, which can nudge the borrower to consider a sale. Hunter is looking at a number of assets where the sponsor is keeping all options on the table (sale or refi), which will ultimately allow the markets to determine which path to take.

Owens: The majority of the refinancings are driven either by maturities or the desire to repatriate equity while also retaining an income stream after debt service. 

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

Ryan: One unique refi we recently completed was on a zero cash-flow deal in a major MSA. Most lenders were converging around SOFR +400, with three outliers competing in the S+300 range. We ultimately closed at S+250.

Owens: The balance sheet market, for example, continues to be active in cash-flowing transactions, with spreads now in the 200s for quality assets and sponsorship.  

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

Ryan: Rates, specifically spreads, were on a nice downward trajectory until the tariffs went into effect in early April. Since that time, we have felt spreads widen slightly, and/or lenders show some hesitation in quoting until the dust settles. Our belief is there will be some pockets (geographically) where lenders will pull back, but there is still plenty of capital chasing quality deals, continuing a compression of spreads.

Our belief is there will be some pockets (geographically) where lenders will pull back, but there is still plenty of capital chasing quality deals, continuing a compression of spreads.

Charlie Ryan

Share this quote

Owens: The markets are constantly evolving right now and we are closely monitoring the benchmarks and broader economic indicators. Recent volatility caused some spread expansion for levered debt funds and the SASB market. Having options in this market is essential in order to maintain pricing. Barring any unforeseen event, we expect to be able to negotiate spreads and/or non-economic terms more aggressively than 90 to 180 days ago. 

HIT: What entities are most active in the debt market right now (private, regional banks, CMBS, alternative)? Are there any trends in who will provide more capital in 2025?

Ryan: All capital providers are more active now than they were 12-24 months ago. There are more alternative lenders in the hospitality space than ever, and CMBS/LifeCo debt functions efficiently in the current environment. We anticipate alternative lenders to continue capturing market share with their higher leverage options, while regional banks will continue offering the best pricing if recourse/deposit structures are available.

Owens: Fortunately, all of the lender groups are active today, which creates a variety of options. We will see a dramatic increase in the bank market, CMBS continues to be an interesting alternative given the pricing power in this market, as well as lower costs to close.