Boutique and lifestyle hotels have come of age in the eyes of an increasing number of lenders. Debt financing, in particular, has become more consistently available in recent months, said several panelists during a discussion of financing at this week’s Lifestyle/Boutique Hotel Development Conference. Lodging Hospitality and HVS Hotel Management sponsored the event, which was held at the Fontainebleau Hotel in Miami Beach.

“A thriving debt market has emerged in the past year for acquisitions and refinancings of well-established, cash-flowing properties, including boutique and lifestyle hotels,” said Tom McConnell, senior managing director of Cushman & Wakefield’s Hotel Transactions Group. As example, McConnell said in early 2009 his firm was asked to advise on the refinancing of two hotel properties. “We sent queries to 150 lenders. Two responded, and one of them dropped out,” he said. “By contrast, in the second quarter of this year, we queried 100-plus lenders for a refinancing and received 10 to 15 term sheets.”

He added that terms have also gotten more favorable: Interest rates today range between 5.7 to 6.5 percent versus eight to nine percent last year. Funding sources include life insurance companies, U.S. and foreign commercial banks and mortgage REITs.

Angelo Stambules, who recently joined Marriott as senior vice president of mortgage banking, said for certain projects—particularly conversions of independent properties—the brand company will provide financing to bridge the gap between the first mortgage and the equity in a deal.

The panelists noted the shift in attitudes among lenders toward the boutique segment.

“We’ve accessed debt from a wide variety of sources, but we’ve never had to pay a premium because we operate independent boutique properties,” said Ellen Brown, executive vice president, acquisitions and development for New York City-based Denihan Hospitality Group. “We believe and lenders recognize every one of our hotels is its own brand.”

As McConnell added, in the 1980s nearly every hotel financed in New York City was a full-service branded property. Today, of the roughly 10,000 new rooms added to the market or under development, 3,000 to 4,000 are in the boutique segment, and the rest are select-service properties.

“In the early 1980s, it was nearly impossible for Steve Rubell and Ian Schrager to get financing for their non-branded boutique hotels,” said McConnell. “Today and going forward, boutiques are on par with branded hotels as to who will lend on them.”

The panel disagreed somewhat on the role food and beverage plays in the dynamics of boutique hotel financing. While Brown believes “food and beverage sets the stage for all our properties,” Stambules countered, “Lenders often look at f&b in a boutique as a volatile component (of the business) and tend to underwrite these projects more conservatively.”

Even though McConnell called the debt market for new boutique development “barren,” he sees some stirrings of activity on the equity side, particularly for conversions of existing hotels to boutiques or adaptive reuse of other commercial real estate.

“It’s still a problem,” said Stambules. “After all, why would equity investors buy into new development and wait three to five years for the project to come to fruition when today they can buy a busted property with a lot of upside potential.”