Model the investment without assuming that refinancing will release equity or that the sale market will improve. Ask what happens if cash flow is weaker, the valuation is lower and permitted leverage is reduced at maturity.
OCC guidance treats repayment capacity, collateral value and covenant measures as separate underwriting considerations. An existing loan balance does not establish the amount a replacement lender will advance. (occ.gov)
Our recommended maturity schedule shows:
- Remaining principal and any extension payments.
- Forward income under the replacement lender’s definitions.
- Appraisal and lending assumptions.
- Financing fees, required reserves and outstanding capital needs.
- Equity required if proceeds fall short.
Hypothetical illustration: an $8 million loan matures when the property is valued at $10 million. If a replacement lender permits 60% LTV, that constraint supports $6 million of debt, leaving a $2 million repayment gap before costs. DSCR or debt-yield limits could reduce proceeds further.
For a sale, show the exit income basis, capitalization assumption, selling costs, debt repayment and contractual termination costs separately.
Recommended investment-committee question: if no refinancing distribution occurs and the holding period extends, can the ownership group fund and operate the hotel without a forced sale? If not, the exit assumption is a financing dependency, not merely upside.