The Deal
| Asset | Loan Amount | As-Is Value | LTV | Term | Purpose |
|---|---|---|---|---|---|
|
Motel Property
Cooke City, Montana
|
$1,015,000 | $1,450,000 | 70% | 12 months interest-only | Refinance |
The Challenge
Non-standard ownership transition. The borrower was not previously on title, the existing owners would remain in the new entity with minority interests of less than 20%, and proceeds would be used in part to provide liquidity for the ownership change.
Current operations did not yet represent the stabilized business plan. The property historically operated seasonally in a rural market. Existing cash flow did not yet support the proposed loan, while the borrower planned winterization and other improvements intended to support year-round operations and more sustainable income.
What the Broker Needed
The broker needed a lender willing to evaluate the post-closing ownership and guarantor structure and finance the property through the period required to implement the business plan to improve operations and work toward sustainable income within the bridge term.
Kirkland's Solution
Evaluated and structured around the ownership transition. Kirkland did not treat the non-standard ownership structure as an automatic decline. In addition to the majority owner's guarantee, the two existing owners retaining minority interests were required to provide personal guarantees. The additional structural risk was addressed through an underwriting exception and reflected in pricing.
Underwrote the feasibility of the stabilization plan. Kirkland evaluated whether the business plan could realistically improve the property’s economics during the bridge period.
Why the Deal Was Funded
The business plan had a clear economic rationale. Of the approximately $90,000 improvement budget, $54,000 was allocated to functional winterization needed to support year-round operations. The winterization expenditure was tied to a specific operating objective: extending the property’s operating season and creating a path toward more sustainable income. The remaining $36,000 of cosmetic work was not relied upon to support the as-is value.
The stabilization plan had underwriting support. The winterization and year-round operating plan aligned with the stabilized income assumptions considered in the appraisal and Kirkland’s internal analysis. Kirkland tested the business plan against multiple income scenarios rather than relying on the borrower’s projections alone. Separately, the final $1.45 million as-is valuation provided collateral support for the loan.
The property had underlying strengths beyond the business plan. Although the property was in a rural market, its proximity to Yellowstone National Park, Beartooth Highway frontage and tourism-driven demand provided positive offsets to the location and seasonal operating history.
Result / Exit
Kirkland funded a $1.015 million bridge loan at 70% LTV. The broker was able to deliver financing for a client whose transaction involved both a complex ownership change and a property that had not yet reached stabilized operations.
The bridge loan gives the borrower time to complete the winterization and operating transition, demonstrate more sustainable property performance and pursue permanent hospitality financing as the intended exit.
What Brokers Can Take From This Deal
Complex ownership situations are not automatically deal breakers. The resulting ownership structure, borrower and guarantor credit, experience, guarantees, collateral and overall risk profile all matter.
Improvements should impact the bottom line. A renovation budget is more meaningful when the work has a clear connection to operations, revenue potential and sustainable income. Capex matters when it changes the property’s economics.
A property does not always have to be fully stabilized on day one. Current performance should not automatically deter a broker from bringing Kirkland a deal when there is a credible and supportable path to improvement during the loan term. The important question is whether the borrower can establish sustainable income within the bridge period.
Time should solve something. A bridge loan should allow the borrower to complete a specific transition and reach a stronger financing position. More time alone does not fix an unresolved problem.
Have a commercial real estate deal with a complex ownership structure or a credible path to stabilization? Send Kirkland the scenario for review.
