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REAL ESTATE WEEKLY Vol. 54, No. 23 • 72 pages in 3 sections Peter Berk, President, AFC Hotel Finance Group PROFILE OF THE WEEK WEDNESDAY, MARCH 26, 2008 Credit squeeze opening new doors for Berk BY JASON TURCOTTE The credit squeeze may be deterring some hotel developers, but the sudden scarcity of financing from local banks and lending institutions has brought new clients to Peter Berk’s door. Berk, President of AFC Hotel Finance Group, says even the biggest of names have resorted to alternative means of financing — and they’re seeking his assistance in getting hospitality projects off the ground. “It’s creating opportunities for us to grow our business,” Berk said. “The capital markets have certainly helped us out over the last five years. They’ve been frothy. Sometimes you’re lucky and sometimes you’re smart. I don’t know what we were.” With less capital on Wall Street, the volume of hotel financing transactions are down this year, but the market conditions are also driving better known firms to AFC, as developers look into bridge and mezzanine loans. Berk, a native of Connecticut, graduated from George Washington University with an undergraduate degree in accounting, and earned his CPA before taking a position at Ernst & Young. “I came from a family of accountants; that’s why I went into it,” he said. But after auditing real estate companies at Ernst & Young, Berk found himself less interested in accounting and more interested in the real estate industry. He enrolled in Columbia University, earning a graduate degree in real estate investment and development and, shortly thereafter, took an acquisitions position at Jones Lang Lasalle. Berk turned down a JLL promotion that required him to relocate to Chicago and opted for a position at Sonnenblick Goldman, where he worked with the company’s in-house capital division. But after nine months, he walked in to the office one morning, picked up a copy of The New York Times and read that the Soros Funds had imploded. “I thought: ‘Interesting, this sounds a lot like my job,’” he said. He was right. The incident negated the need for Berk’s role at Sonnenblick, but he was moved to the brokerage side of the business, where he cultivated his hotel loan expertise and placed debt with its capital markets group. the 218-room project’s equity. Berk specializes in the limited and self service hotel market, meaning hotels that do not provide a threemeals-per-day restaurant. This market includes small boutique hotels and popular mid-sized franchises like Courtyard Marriott, Holiday Inn and Hampton Inn. AFC deals typically average between $5-20 million. His deals include $39 million financing for the Graves Hotel, in Minneapolis; $10.2 million financing for a Crowne Plaza, in Harrisburg, Pa.; and $10.5 million in financing for The Carlton Hotel, in South Beach, Fla. AFC has executed numerous transactions for Kinseth Hospitality (including a $55 million portfolio recapitalization) and JHM, the largest Asian hotel owner in the country. AFC provided $200 million in financing for JHM’s 18-property portfolio. While residential, and some commercial markets have taken hits this year, Berk said the hotel outlook appears relatively strong; he added this downturn doesn’t have the oversupply that real estate has had in the past. “I think the New York market is somewhat insulated from what’s going to happen,” Berk said. “Today, it takes longer to find the capital. But once the capital’s committed, it takes less time to close the loan.” The biggest shift Berk faces as a result of today’s market turmoil, is educating owners. Entrepreneurs in rural or suburban markets don’t always realize there are financing options beyond their local bank. And with local banks tapped out, Berk has seen more clients who fit this bill. Berk lives on the Upper East Side with his wife Sheryl — a writer and autobiographer for both Britney Spears and Carmen Elektra — and their five-yearold daughter. Away from the office, he enjoys tennis and scuba diving. I With a desire for doing originations and a persuasive pitch from his fraternity brother, a partner at AFC, he left the firm in 2003 to head AFC Realty Capital’s Hotel Finance Group. “The idea when we started the group was to bring New York capital and expertise to markets outside New York,” Berk said. And AFC has certainly accomplished that goal. Berk has headed financing for hotel projects across the country, including several transactions in Texas, Ohio, California and North Carolina. But one of his most challenging deals came in his own backyard: Berk was responsible for the $110 million financing of the Intercontinental Hotel, bringing in debt and mezzanine capital covering 90% of Adapted with permission from Real Estate Weekly. Copyright 2008 Hagedorn Communications Corp. For more information about reprints, contact PARS International Corp. at (212) 221-9595.


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