Credit Evaluation School Instructor eBook - Oct 2023

Internal Use Only

Harrington Hotels, Inc. – Pass • Officially opened for business in 2018. • The original management team was unsatisfactory and guarantors Wood, Finn, and Costanza personally supported the operation’s cash flow. • New management team hired and have now returned to profitability in 2019. • LTV at inception was 56% (3,300/5,900). Value is same or higher today. • New management team from competing resort hired in November of 2019 • Pass based on good LTV, profitability, guarantors paying when needed and having ability to do so, and improving prospects. People: Debtors have long term borrowing history in construction industry and have always performed as agreed. Hotel is a new venture for the owners, who travel frequently to Orange Beach area and recognized the need for this type of facility. Land was purchased in cash and is being used as part of the overall owner’s contribution to the project. Purpose: Permanent financing of hotel construction. Payment: 20 year amortization. Repayment is from profitable operations of hotel. Protection: First REM on new resort grade hotel located on Orange Beach. The appraised value is $5,900M, which results in a 56% LTV. Adequate guarantor support. Performance: Original management team was unsatisfactory to the three partners and required the three to inject personal funds to support the cash flow. New management team from competing resort hired in November 2019. Pass based on satisfactory LTV, profitability, guarantors paying when needed and having ability to do so, and improving prospects.