Our Lending Box, and Why We're Publishing It

On most broker calls that reach this desk, the requested proceeds are higher than the cash flow can support. The conversations differ. The underwriting issue does not. Each sponsor arrives with a value, a leverage percentage, and a capital stack that works only if the lender accepts the value as the starting point.

We do not start there. We start with the income, the time required to produce it, and the cash needed to carry the loan until it arrives.

This is the first note in From the Underwriting Desk. Each Tuesday, we will publish what is crossing the credit desk, the structure we are using, and some of the files we pass on. A broker should not need a second call to learn whether a $30M hotel bridge request belongs in our queue.

Why publish the box

Capital is active. The Mortgage Bankers Association forecasts $805.5B of commercial mortgage originations in 2026, up 27% from 2025 (Mortgage Bankers Association). Those are real reasons for borrowers to run a process.

They are not a reason to assume every lender will provide the same proceeds.

A $25M request can receive five indications and still have only one structure that survives the first underwriting model. One lender is focused on lower leverage. One has a different view of the franchise. One accepts an 18-month ramp but not a 30-month ramp. One has a construction hold that does not match the sponsor's delivery schedule. The headline is competition. The work is still credit.

We are publishing the box because the difference matters before anyone spends money on reports. A sponsor who needs 75% of cost should know that our current posture is not built for that request. A broker with a $40M resort repositioning should know that we will spend time on the reserve, the seasonality, and the exit before we debate a spread.

The trade-off is simple. We can move quickly when a file fits the box. We are not going to stretch the box to make a request fit.

How we size proceeds

Debt yield is our starting test. It answers a plain question: how much stabilized net operating income is available for each dollar of loan balance? A $4M stabilized NOI and a 10% debt-yield screen support $40M of debt. An appraisal may indicate a larger number. The income still supports $40M.

That distinction is most important in hospitality. Value can reflect a strong trailing season, a renovation plan, or an ADR step-up that is not yet in the operating statement. We will credit a business plan when the inputs are specific: a brand-approved PIP, a construction budget, a market report, and a ramp that does not assume a new record rate in month six. We do not lend today against the best year in the pro forma.

For transitional assets, we generally size to debt yield and stay at or below 65% of cost. The two tests work together. Cost protects the basis. Debt yield protects the exit. If either test produces lower proceeds, the lower number governs.

A reserve is part of that calculation, not a line item added after leverage is settled. If the asset requires $2.5M of carry through renovation and stabilization, the sources and uses must fund it. A reserve that lasts through construction but not through the operating ramp is not a reserve. It is an unfunded equity call scheduled for the first difficult quarter.

We are comfortable with a business plan that shows its work. We are not comfortable with one that needs both a high valuation and a short ramp to repay us.

What the structure looks like

The current box is designed for hotel, resort, and mixed-use hospitality assets where a defined event can improve cash flow. That event can be a renovation, a franchise conversion, a lease-up component, a maturity refinance, or completion of a construction program. It needs a measurable cost, a timetable, and an exit path.

Loan size begins at $5M. The efficient range is $20M to $100M. Below $20M, the third-party work often takes up too much of the transaction. Above $100M, the capital stack may need more participants and a different timetable. Neither point makes a deal impossible. Both change how we underwrite it.

We generally use interest-only debt with a funded interest reserve through stabilization. Terms are matched to the plan, not pulled from a shelf. A 24-month renovation and a 12-month ramp need a different structure from a completed hotel waiting on a permanent loan. Extension options can be available, but they are priced and conditioned. They are not assumed in the base case.

On a complete package, we aim to return a term sheet within 72 hours and close in 45 to 60 days. “Complete” has a numeric meaning: sources and uses, trailing and current operating statements, sponsor financials, property-level performance, a scope of work, and a credible timeline. Missing one of those items often costs more than the three days saved by sending an early package.

Where we draw the line

We will spend time on select-service and upper-midscale hotels, resorts with understandable seasonality, and mixed-use hospitality assets where the hotel economics can be isolated. We also want maturity files that arrive before the maturity date. A sponsor who begins the process six months early has options. A sponsor who begins 30 days early usually has an extension request.

We will pass when the plan depends on a lender ignoring the hard part. That includes proceeds set only by LTV, construction budgets with no contingency, a PIP that is not funded, and a reserve that ends at certificate of occupancy while the operating plan needs another year.

We will also pass on thin liquidity. If post-closing sponsor cash is less than the reserve, the first variance becomes a capital-structure problem. That is not solved by adding three months to a maturity.

The point of the box is not to make every file smaller. It is to make the loan durable enough that a permanent lender can refinance it when the work is done.

The box this week

• Loan size: $5M floor; $20M–$100M sweet spot; flexible above
• Asset focus: hotels, resorts, and mixed-use hospitality; bridge and construction
• Leverage: generally to 65% of cost on transitional hospitality, sized off debt yield
• Structure: interest-only with an interest reserve funded through stabilization
• Timing: term sheet target of 72 hours on a complete package; closing target of 45–60 days

Send the file with the current operating statement, sources and uses, business plan, and sponsor liquidity. We will tell you quickly whether the proceeds work and what would need to change if they do not.