I had a question the other day about eligibility for properties used for nightly or weekly rentals of not more than 30 days. The SOP is very clear that hotels, RV parks, campgrounds and similar entities are eligible under limited circumstances. Limited circumstances. As an experienced SBA lender, you’re sure to know the circumstance referred to in the SOP.

So quickly now, without looking at the SOP and without looking at your neighbor’s paper: What determines whether such a business is eligible? Well of course! The business is eligible if more than 50% of its revenue for the prior year is from transients who stay for less than 30 days at a time. (SOP 50 10 7.1, page 18).

But let’s pick that definition apart. First thing to point out is that eligibility is based on annual revenue and not on the terms of the residents’ leases. Now, if you know me, you know I’m a history buff. So you figure that now comes a historical reference. Right you are:

Former President Hoover moved into New York’s Waldorf Astoria Hotel in December 1940, and permanently in  1944. He left only when he died in 1964. By that definition, that he occupied the space for more than 30 days would not necessarily make the hotel ineligible. The issue: How much of the hotels’ revenue from the prior year is derived from guests who occupy the space for more than 30 days at a time? If it was 50% or less, then the Waldorf Astoria passed the eligibility test.

But hold on. Great Aunt Sadiebell had to move out of the Waldorf when a massive remodeling began in February 2017. The property is expected to reopen in the second half of 2024. Does that mean we have to wait until it has a full year of revenue in 2025 to determine eligibility? Not necessarily. If projections show that more than 50% of its revenue will be derived from transients who stay for 30 days or less the project is eligible.

If you plan to make reservations when the New York Waldorf Astoria is done with its renovation, you might want to ask for suite 31-A, The Presidential Suite in the Waldorf Towers. That’s Herbert Hoover’s old room.

Richard Jeffrey, Senior Associate
Head Underwriter
richard@jrbrunoassoc.com
www.jrbrunoassoc.com