To the Editor:
I couldn't agree more with your article on the perceived risks of financing hotels ["Market Seen Exaggerating Risk in Hotels," July 27, page 1].
I am a local banker who has financed seven hotel deals over the last two years within my group authority. Ever since I started taking the deals to my committee level because of total-exposure rules, they have been declined. The credit side of the bank has suddenly classified hotels as single-purpose property and as discouraged loan types.
I don't get it. All of my loans are conservatively structured, with great cash flow producing debt service coverage ratios on average of 1.75. Most of them have a break-even occupancy level of around 35% and are currently averaging 70% to 80%. It would take one heck of an economic slowdown or recession to drop down that far. God forbid, if we ever did have a recession of that magnitude, we would have a lot more than just hotel deals to worry about.
Larry H. Schupbach, Vice president
[Bank name withheld by request]