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A whole new angle

Innovation in finance may seem an anomaly under average circumstances, but FINOVA brings a fresh perspective to the lending table. FINOVA, a name which is derived from the phrase "financial innovators" is more than a moniker; it is the mantra of the $12 billion Scottsdale, Ariz.-based financial giant.

Across all areas of commercial lending, this financial firm has a honed focus that is aimed at serving the middle market with a broad range of financing products within three complementary business groups: commercial finance, specialty finance and capital markets. This orientation enables FINOVA to provide "one-stop" financing to customers whose businesses span a wide range of industries.

Among the members of FINOVA's Specialty Finance group, for instance, are Franchise Finance, Healthcare Finance, Resort Finance and Specialty Real Estate Finance. Randy Heller, senior vice president of the Specialty Real Estate Finance division, explains his group's focus.

"We specialize in real estate-oriented products such as senior-term loans, acquisition loans and bridge/interim loans for hotel and resort properties nationwide, as well as in Canada and the Caribbean," he says. This group also provides equity investments in credit-oriented real estate sale-leasebacks, he says. Transaction sizes of $5 million to $40 million are typical in this group.

"Our specialty is providing reliable, relationship-oriented real estate financing - primarily term loans against proven cash flow - for hotels and resort properties," says Heller. This group also provides equity for credit sale-leaseback transactions for all commercial real estate asset types and can provide access to the commercial lending industry's broadest range of financing and capital-market products and services.

Hotel finance expertise When FINOVA Specialty Real Estate Finance provides loans for hotel and hospitality properties, its underwriting is based on the strength and soundness of a property's historical cash flow as well as the quality and experience of the management team, Heller says. "We also maintain a preference for hotels and resorts in destination locations," he adds.

When making equity investments in leveraged-lease and single-investor-lease deals in hotel, industrial, retail or office properties throughout the United States, this group typically targets transactions ranging from $10 million to $100 million in property cost and those secured by triple-net bond-type leases to investment-grade tenants.

The Resort Finance Group, on the other hand, has not seen many lenders aggressively pursuing the business, though competition has increased visibly in the last few years. "As the timeshare business continues to gain credibility, there is more capital attracted to this area," says Jeff Owings, senior vice president of the Resort Finance Group.

This group furnishes the resort industry with financing that transcends the one-size-fits-all approach. The Resort Finance Group can provide creative loan structures with competitive pricing in the form of construction, acquisition, working capital, equity and receivables financing ranging from $3 million to $95 million, Owings says.

Complementing its timeshare-resort finance program is FINOVA's full-service program for the financing of fractional resorts, the increasingly popular hybrid product between timeshare ownership and whole-unit ownership. "We offer acquisition, construction and receivables financing to fractional-resort developers," says Owings.

Grand Pacific Palisades Resort, a timeshare resort/hotel adjacent to Legoland in Carlsbad, Calif., is a recent project of the Resort Finance Group. "The Speciality Real Estate Group financed the hotel portion of the facility, then it rolls over into a sell-out of the timeshare resort units," says Owings.

The attractiveness of the timeshare property has become noticeable to the hotel operator recently, too. According to Owings, many hotel operators are evaluating the possibility of entering the timeshare business if they haven't already.

There also has been more market segmentation within the timeshare industry itself lately, Owings says. More luxury brand hotels are entering the market, a trend he expects to see continue for the next five to 10 years.

Focused on franchise financing FINOVA also caters to the unique financing needs of the franchise industry through its Franchise Finance arm. This group has developed the expertise and in-depth knowledge necessary in restaurant financing.

Within this group, FINOVA is able to offer a complete range of loans, leases and turnkey financing to accommodate the client's specific needs, including financing for acquisition, business value, construction, equipment, ground leases, new-store development, real estate, remodeling and refinancing.

Franchise financing wasn't always on top of the charts, admits Bill McKinney, senior vice president of Franchise Finance. "At the beginning of the 1990s, most financing was done by banks and finance companies," he says. "Then franchising became attractive to the securities marketplace." The 1990s have seen a tremendous number of companies buying and packaging transactions for sale in the public marketplace, says McKinney. "That change took place because interest rates began to rise," he adds. "The industry is adapting to some degree, but still this can be a significantly more difficult product to offer than it was in the beginning."

There are more new competitors in the franchise finance field now, says McKinney. But FINOVA, historically a portfolio lender, differs substantially from the securitized lender. "We focus on the business value versus the pure real estate aspect," adds McKinney.

FINOVA's Healthcare Finance group, too, focuses on building long-term relationships. From hospitals to sub-acute-care, the Healthcare Finance group arranges a wide variety of financial packages ranging from $500,000 to more than $30 million.

"By financing receivables with FINOVA, a business can enjoy predictable, consistent cash flow," says Randy Abrahams, vice president of Healtcare Finance. This instant liquidity can be used for working capital, expanding financial flexibility, acquiring strategic or complementary businesses, simplifying cash management or other business needs, he says.

The Healthcare Finance group also offers a variety of equipment-lease options customized to suit specific needs, including capital and operating leases for diagnostic-imaging equipment.

FINOVA Realty Capital, a member of the company's Capital Markets Group, has made a name for itself as a commercial mortgage banking firm and provider of capital solutions to commercial real estate owners and developers throughout the country. According to R.J. Brandes, executive managing director for FINOVA Realty Capital, the capabilities of his group range from conventional mortgage financings to complex mezzanine and equity transactions. Last year, FINOVA Realty Capital originated $3 billion in loans.

Like all businesses, this one, too, has evolved. "There's a terrific liquidity in the market now," says Brandes. Underlying assets he says, are very strong, and Brandes sees no deterioration in the quality of loans. He adds that default rates are lower than ever. "There's going to continue to be a substantial growth in this business," says Brandes. "There's huge volume here. We're busy as bumblebees." o

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