Hotel Capital Stacks Adapt as Florida Drives $7.2B in Hospitality Deals

By RadCRE Research · 2026-11-09 · Industry Insights

With Florida generating $7.2B in hotel transactions amid higher borrowing costs, investors are restructuring capital stacks to sustain transaction volume.

Hospitality Liquidity Concentrates Despite Capital Costs

Investment activity across the hospitality sector continues to demonstrate acute geographic concentration as sponsors navigate elevated debt expenses and operational headwinds. According to recent transaction data from MSCI Real Capital Analytics, Florida has emerged as a primary catalyst for domestic hotel investment, capturing more than one-fifth of all U.S. hotel sales over the most recent four-quarter period [1]. Investors deployed $7.2 billion into the state's hospitality assets during this timeframe, establishing a robust benchmark for deal flow even as property owners face mounting financing hurdles and rising operating expenses [1].

The dichotomy between vigorous transaction volume and tightening debt capital was a central focus at a recent industry forum hosted by the Kabani Group in downtown Miami [1]. Hospitality leaders, including Ahmed Kabani of the Kabani Group and John Lancet, Senior Managing Director at HVS, convened near the JW Marriott Marquis Miami at 255 Biscayne Boulevard Way to assess how buyers and sellers are resolving underwriting disparities under restrictive monetary conditions [1].

Financing Hurdles Reshape the Capital Stack

As debt capital markets recalibrate, traditional senior lenders have re-evaluated proceeds, forcing acquirers to re-engineer their capital structures. Across national venues such as Commercial Observer's National Finance Forum—where institutional perspectives from leaders including Larry J. Kravetz, Managing Director and Head of U.S. CRE/CMBS, reflect broader securitized and commercial lending conditions—the dialogue continues to center on debt availability and liquidity constraints across commercial asset classes [2].

In response to elevated base borrowing costs [1], hospitality sponsors active in high-volume regions are increasingly compelled to bridge the gap between senior debt proceeds and sponsor equity. With debt service coverage ratios under pressure from both higher interest rates and inflationary operating costs [1], transaction execution increasingly relies on mezzanine debt, preferred equity, and structured junior capital to preserve underwriting feasibility without over-leveraging senior noteholders.

Underwriting Operational Headwinds in Core Markets

While top-line transaction figures—such as Florida's $7.2 billion volume [1]—highlight ongoing private capital demand for lodging properties, bottom-line performance is being tested. Rising operating expenses continue to compress net operating margins across full-service and select-service portfolios [1]. When higher operating outlays intersect with increased debt service payments [1], conventional loan-to-value allocations retrench, creating an expanded tranche where subordinate capital plays a critical role.

For buyers pursuing acquisitions in competitive Southeastern destinations, the deployment of mezzanine financing and structured equity allows institutional groups to maintain aggressive acquisition mandates while managing senior refinance risk. These hybrid layers absorb initial yield volatility, providing the runway required to implement post-closing operational efficiencies or property improvement plans.

RadCRE Perspective

"When a single state captures more than 20% of national lodging transactions—accounting for $7.2 billion in capital deployment—it confirms that equity conviction remains exceptionally durable," notes Majid Radaei, Founder and Principal Broker of RadCRE. "However, with MSCI data pointing directly to higher borrowing costs and operational expense compression, standard senior debt execution is no longer sufficient on its own. Sponsors executing in this environment must utilize structured junior capital, preferred equity, and mezzanine solutions to optimize weighted average costs of capital and ensure debt service coverage remains defensible throughout the holding period."

Tags: hotel capital stack strategies, commercial real estate mezzanine debt, preferred equity hotel financing, hospitality investment underwriting