EB-5 and Hospitality Financing: Leverage and Structure Matter More Than Price

By David A. Sudeck —

This post is the fourth in a series presenting my current thoughts on the viability and timeliness of EB-5 financing for new hospitality construction. Each installment is published as a standalone piece and can be read independently of the others in the series.

• EB-5 and Hospitality Financing: A Structural Shift in Capital Markets
• EB-5 and Hospitality Financing: Rural TEAs—Still the Fast Lane
• EB-5 and Hospitality Financing: Urban EB-5 Is Still a Large-Scale Game
• EB-5 and Hospitality Financing: Leverage and Structure Matter More Than Price (this post)
• EB-5 and Hospitality Financing: Why EB-5 No Longer Slows Deals
• EB-5 and Hospitality Financing: How EB-5 Improves Equity Returns
• EB-5 and Hospitality Financing: Practical Steps for Developers
• EB-5 and Hospitality Financing: Why Now Is a Good Time

Developers evaluating whether to include EB-5 in their capital stacks often start by comparing rates, but that framing misses the point. EB-5-focused lenders are typically more cost-effective than debt funds and competitively priced with traditional banks. However, pricing is not their primary differentiator. The real distinction lies in how much leverage a developer can access and on what terms, and this is where EB-5 diverges sharply from both ends of the conventional lending spectrum.

Traditional banks generally limit hotel construction loans to 60 to 65 percent loan-to-cost and often require full or partial recourse. That ceiling forces developers to fill the remaining gap with more expensive equity or mezzanine capital, layers that can meaningfully erode overall project returns. Debt funds, for their part, can offer higher leverage, but at a higher cost, often Secured Overnight Financing Rate (“SOFR”) plus 500 to 800 basis points, along with stringent covenants. Those covenants can constrain a sponsor’s flexibility throughout construction and stabilization, adding a layer of operational risk that many developers underappreciate at the term sheet stage. In contrast, EB-5 lenders combine higher leverage or allow a layer of Commercial Property Assessed Clean Energy (“C-PACE”) financing to achieve overall higher leverage, with non-recourse terms, making EB-5 an especially compelling financing option for projects in rural and tertiary markets with constrained access to conventional capital. For developers in those markets, where bank appetite is thin and debt fund pricing is expensive, the combination of higher leverage, flexibility on terms, and a C-PACE component and non-recourse structure can be the difference between a deal that pencils and one that does not.

Feel free to reach out with any questions or thoughts on this topic, and please meet with us at the upcoming 2027 EB-5 & Global Immigration Expo in Newport Beach, California, January 20-22, 2027. Click here to register.

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David is a partner and co-chair of Blank Rome’s Hospitality practice, where he focuses on the hospitality industry, with particular emphasis on the financing structures that support hotel development and acquisition. His practice draws on extensive experience guiding developers, lenders, and investors through complex capital stacks in the hospitality sector. Learn more about his practice here.