Feasible Subject to Conditions at a Reduced Loan: 80-Room Upper-Midscale Hotel, Interstate 85 Exit 90, Gaffney, South Carolina

Study at a Glance

Determination

The project is feasible subject to the conditions precedent listed at the end of this study, at a guaranteed loan of $10,060,000 rather than the $11,100,000 the sponsor requested. At the requested amount, debt service of $984,000 exceeds the projected stabilized cash flow available for debt service under the Part 5001 coverage definition, and the file would present to the Agency below 1.0x. At $10,060,000 on a 30-year amortization, annual debt service is $844,000, coverage reaches 1.12x in the first stabilized year and 1.24x by year five, and the lender's customary 1.20x policy floor is met from year four. The first two operating years do not cover debt service and are carried by an operating and interest reserve of $400,000 funded from borrower equity, with principal and interest commencing at the projected break-even month, consistent with the Agency's February 2026 guidance to lenders on ramp-up periods.

Scope and Basis

This is a model feasibility study prepared for publication. It demonstrates, on a real and currently listed property, the analysis an applicant and lender receive when 7 CFR Part 5001 requires an independent study, and it is organized around the five components in Appendix A to Subpart D. It was prepared without a site inspection, without broker or sponsor interviews, and without an engagement from any party, and it is not to be relied on for any transaction. Facts verified at their source are presented as findings; items that could not be verified in research, including the parcel identifier, current zoning, utility capacities and real estate taxes for the subject and its competitors, are carried as stated assumptions and appear in the conditions. The land price is an assumption, because the pad is marketed without an asking price. The hotel is modeled as an unnamed national upper-midscale franchise; brand selection is a condition. When Part 5001 requires a study on your file, the scope is set by the Agency and the fieldwork is done in full; this page and our USDA feasibility study consultant page describe that engagement, and the document checklist lists what it requires.

Why This File Requires an Independent Study

A new hotel is a new business under 7 CFR 5001.3, and the guaranteed loan exceeds $1,000,000, so 7 CFR 5001.306(a)(3)(i) makes a feasibility study by an independent qualified consultant acceptable to the Agency mandatory. The study's scope is determined by the Agency and depends on the complexity of the project and the borrower. The rural area test is the gate before everything else: Gaffney's 2020 Census population is 12,764 and Cherokee County's 2025 estimate is 58,275, both far below the 50,000-person city threshold, and Gaffney lies outside the urbanized area of any city over that size. Rural Development has lent in Gaffney before, including a $34.5 million Community Facilities loan to Limestone University in 2018. The determination itself is made on the USDA eligibility map, Business Programs layer, and the dated map result is a required exhibit; obtaining it is the first condition precedent.

Project Business Plan

The Project will operate as an 80-room, four-story, interior-corridor upper-midscale franchised hotel on the ±2.698-acre semi-improved pad fronting Interstate 85 at Exit 90, within the 360,000 square foot, 75-store Gaffney Outlet Marketplace. The building program comprises approximately 48,000 gross square feet with a market-standard guestroom mix of king and double-queen rooms, a complimentary hot breakfast operation, a fitness room, an outdoor pool, a market pantry, one small meeting room and approximately 85 surface parking spaces. The hotel will operate 24 hours with a staff of approximately 22 full-time equivalents under a general manager and will be managed by the sponsor entity under a franchise license with a national upper-midscale brand, targeting the weekday corporate and contractor demand generated by the county's announced industrial investment, the highway transient segment on Interstate 85, and the leisure segment drawn by the outlet center.

Marketing and sales will anchor on the brand's central reservation system and loyalty program, direct corporate negotiated rates with First Solar, the Commerce Drive industrial employers and the regional healthcare system, construction and commissioning crew blocks sold through extended-stay weekly rates during the 2027 to 2028 industrial ramp, and placement on the outlet center's visitor channels.

Amenities:

• Interior corridors, four stories, elevator service
• Complimentary hot breakfast room seating approximately 50
• Outdoor pool and 24-hour fitness room
• Market pantry and guest laundry
• One meeting room of approximately 600 square feet
• Approximately 85 surface parking spaces including truck and trailer stalls

Site, Zoning, Utilities and Taxes

The site is a ±2.698-acre semi-improved outparcel fronting Interstate 85 at Exit 90, marketed by the center's broker as ideal for a hotel. At approximately 117,500 square feet it comfortably fits a four-story, 80-room prototype with surface parking. Access is from Factory Shops Boulevard at the Exit 90 interchange, the northern terminus of SC 105. The most recent public traffic counts place Interstate 85 at this segment at approximately 60,000 vehicles per day, with SC 105 at about 12,300 and US 29 at about 12,400; the counts are 2015 vintage, the corridor has since been widened to six lanes, and a current SCDOT count is an open verification item. An earlier marketing flyer shows the pad at ±2.34 acres, so the current survey must be confirmed with the broker. Parcel identifier, zoning confirmation, municipal boundary, utility will-serve letters and the current tax bill could not be obtained from county systems in research and are conditions; the model carries real estate taxes of $120,000 per year, derived from county millage applied to the stabilized cost basis, as a stated assumption. The pad sits inside an operating retail center and is described as semi-improved, which supports, but does not prove, utility availability at the lot line.

Market Area and Demographics

The primary market area is Cherokee County with the Exit 90 corridor at its center, extended along Interstate 85 to the Spartanburg-North interchange hotels about 11 miles southwest. Cherokee County's population was 58,275 at the July 1, 2025 estimate, up 3.6% from 2020. County unemployment of 7.1% in January 2026 ran above the state rate, which signals labor availability for the incoming plants and a softer local leisure base. The demand story is a rotation: Limestone University, with 478 employees and its associated athletics, parent and graduation room nights, closed in May 2025, while the 2025 and 2026 announcement cycle added First Solar's $330 million, 600-job module plant reaching operations in the second half of 2026, the Cielo data center at approximately $2.1 billion, Fenner Precision Polymers at $30 million and 51 jobs, Huwell US at $11.6 million and 25 jobs, UFP Packaging at 136 jobs by 2027, Sticker Mule at $18 million and 50 jobs, and the $415 million, 3.6 million square foot speculative Cherokee Commerce Center 85. Together the announcements exceed 890 direct jobs. The study treats them the way a reviewer will: construction, commissioning, training and vendor travel produce a strong weekday lift through 2028, data center demand largely ends at opening, and the permanent base uplift is modest. Projections are therefore built on shared market demand with a temporary induced layer, not on a permanent step change.

Competitive Supply

The competitive set is the two upper-midscale, interior-corridor properties at the subject's own interchange, totaling 168 rooms; the six midscale and economy properties in Gaffney compete for the rate-sensitive segment and are inventoried but weighted at partial competitiveness. Rates below are indications from brand and travel sites in 2026; the engagement-grade study records direct midweek and weekend rates from each brand's own booking engine on a fixed date, and county taxes and acreage for each competitor, all open items here.

Competitor Number 1 Holiday Inn Express Gaffney This 81-room upper-midscale hotel (interior corridor) was opened in 2021. It is located at 1031 Hyatt Street, Gaffney, SC 29341, adjacent to the subject pad at the outlet center. Real estate taxes: open verification item. The property's dedicated land is an open verification item. An undated broker offering of this near-new property is noted as a caution signal on new-supply economics in this submarket.

Competitor Number 2 Hampton Inn Gaffney This 87-room upper-midscale hotel (interior corridor) was opened in 1999 and renovated in approximately 2017 to 2019. It is located at 115 Nancy Creek Road, Gaffney, SC 29341. The brand's own site showed rates from $124, with travel-site indications of $119 to $132. Real estate taxes: open verification item. The property's dedicated land is an open verification item.

Secondary and partially competitive supply: Quality Inn Gaffney I-85 (83 rooms, 143 Corona Drive), Baymont by Wyndham (59 rooms, 101 Stuart Street), Econo Lodge (68 rooms, 136 Peachoid Road), Sleep Inn at I-85 (834 Windslow Avenue), Red Roof Inn (132 New Painter Drive) and Super 8 (100 Ellis Ferry Avenue), together serving the economy and midscale segments; and the Spartanburg-North I-85 upper-midscale hotels approximately 9 to 11 miles southwest, included in the penetration analysis as a secondary set. No hotel under construction or formally proposed in Gaffney was identified in public sources as of October 2026; confirmation with city and county permitting is a condition.

Performance, Pricing and Ramp-Up

No public county-level occupancy series exists for Cherokee County; the engagement-grade study purchases a custom trend report for the Gaffney set, and the model bridges from the state series. South Carolina ran 62.8% occupancy at a $137.56 average daily rate through August 2024, and the national market closed 2025 at 62.3% and $160.54, the first full-year occupancy decline since 2020. Against that base, a new-build upper-midscale product at a six-lane interstate interchange with an outlet center and an industrial ramp is positioned at a premium to the market's dated supply and at parity with the 2021-built competitor next door.

Total revenue adds other operating income at 3% of rooms revenue. The ramp assumes opening in advance of the 2027 to 2028 industrial commissioning period, penetration of the corporate negotiated segment from the first year, and stabilization in the third. In the engagement-grade study the first operating year is presented monthly, as the Agency's February 2026 lender guidance asks, with principal and interest commencing at the projected break-even month.

Project Cost Estimate and Loan Assumptions

The budget sits at $168,750 per room excluding land, within the published 2026 range for select-service development and at its lower half, consistent with Upstate South Carolina construction costs running below national medians; replacement with a contractor's budget is a condition. Loan assumptions: guaranteed loan $10,060,000 at 68% of cost; borrower equity $4,740,000 at 32%, including the $400,000 operating and interest reserve funded by the borrower rather than from loan proceeds; interest rate 7.50% fixed; amortization 30 years on the real-estate-weighted blend; annual debt service $844,000. The land price is a stated assumption pending the broker's figure.

B&I Program Compliance

The loan exceeds $5 million, so the FY2026 guarantee is 80%, with a 3.0% guarantee fee on the guaranteed portion ($241,000) and a 0.55% annual retention fee on the guaranteed outstanding balance, approximately $44,000 in the first year, carried in operating expenses. Under 7 CFR 5001.105(d), a new business must show minimum tangible balance sheet equity of 20%, rising to 25% where the guarantee is issued before construction completion; the model requests the guarantee at completion and the sponsor's 32% exceeds both tiers, with any subordinated sponsor debt counted only under a lifetime standstill. Feasibility study and business plan costs are eligible uses of loan funds under 7 CFR 5001.121. Projections run from the opening balance sheet through more than two years at stabilized operations, as 7 CFR 5001.303(b)(4) requires, with every assumption listed and the pro forma closing balance sheet attached in the engagement-grade file. The environmental review status is reported in the technical section and its completion is a condition; the franchise agreement, its term against the 30-year amortization, and its property improvement obligations are conditions precedent.

Operating Expenses and the Part 5001 Coverage Test

Departmental, undistributed and fixed expenses, including franchise royalty and program fees, management at 3%, the retention fee and the assumed taxes, bring net operating income before reserves to 30.0% of total revenue in year one, rising to 40.5% at year five as the ramp absorbs fixed costs. USDA then applies the definition that resizes hotel loans: under 7 CFR 5001.3, debt service coverage is EBITDA less reasonably expected replacement capital expenditures, divided by annual principal and interest. For a franchised hotel the replacement capital is not hypothetical; it is the brand-mandated FF&E reserve, modeled at 4% of total revenue. A hotel showing 1.25x on an SBA-style EBITDA basis shows roughly 1.12x here on identical cash flow, which is why this study sizes the loan from the Part 5001 number.

At the sponsor's requested $11,100,000, debt service rises to $984,000 and stabilized coverage falls to 0.96x; the request fails under the Agency's definition before any stress is applied, which is the arithmetic behind the reduced-loan determination.

Break-Even and Sensitivity

Break-even under the stabilized cost structure is 61% occupancy at a $132 average daily rate, four points above the national 2025 occupancy and seven points below the subject's stabilized projection. Single-variable stresses on the stabilized year: average daily rate down $10 produces 1.03x; occupancy down five points produces 1.04x; the interest rate at 8.50% produces 1.02x stabilized, recovering to 1.13x by year five. The combined downside, 63% at $122, produces 0.96x, below the line, and is the scenario the operating reserve and the conditions are built against: the file depends on the industrial demand arriving as announced, and the study says so rather than burying it.

Risk Factors

New supply risk at the subject's own interchange, including the offering of the 2021-built competitor; concentration of the induced demand in a small number of industrial projects whose construction schedules can slip; the market's loss of its university demand base; dated traffic counts pending a current SCDOT pull; the national occupancy decline recorded in 2025; and interest rate risk on any floating structure, tested above.

Conditions and Limitations

Conditions precedent: the dated USDA eligibility map determination, Business Programs layer; broker confirmation of the current survey and a land contract establishing the assumed price; parcel, zoning, municipal boundary and tax verification from county records; utility will-serve letters; a contractor's budget replacing the modeled costs; an executed franchise agreement with term and property improvement plan; completion of the environmental review; direct competitor rate capture on a fixed date and a purchased market trend report; current SCDOT counts; the borrower-funded operating and interest reserve at closing; and the lender's written evaluation of this study in its credit evaluation, as 7 CFR 5001.202 requires. The study is not an appraisal and contains no opinion of value.

What the Lender Received

The engagement-grade version of this file delivers the five Appendix A components with the arithmetic visible, the project positioned in the program's loan-level data, monthly first-year cash flow with principal and interest from the break-even month, coverage under the Part 5001 definition year by year alongside the SBA definition for comparison, the sensitivity battery above, the conditions list formatted as the Conditional Commitment checklist, and a signed certification of independence for the conflict-of-interest disclosure under 7 CFR 5001.208. For the standard the Agency applies to the consultant, see our USDA feasibility study consultant page; for the rules themselves, see USDA loan feasibility study requirements.

Sources

1. 7 CFR Part 5001, sections 5001.3, 5001.105, 5001.121, 5001.202, 5001.208, 5001.303, 5001.306, and Appendix A to Subpart D, Electronic Code of Federal Regulations, current as of October 2, 2026
2. OneRD Guarantee Fee Rates for Fiscal Year 2026, 91 FR 11272, Federal Register, March 9, 2026
3. USDA Rural Development, Business and Industry Guaranteed Loan Program page and lender guidance, 2026
4. USDA Rural Development, letter to all OneRD lenders on underwriting expectations, February 2026
5. Commercial listing, ±2.698-acre outparcel, Factory Shops Boulevard, Gaffney Outlet Marketplace, accessed October 6, 2026
6. Gaffney Outlet Marketplace center information, Simon Property Group, accessed 2026
7. U.S. Census Bureau, QuickFacts, Cherokee County, South Carolina, V2025, and 2020 Census, City of Gaffney
8. South Carolina Governor's Office and SC Department of Commerce, First Solar announcement, November 14, 2025
9. South Carolina Governor's Office, Cielo Digital Infrastructure announcement, June 24, 2025
10. South Carolina Governor's Office, Huwell US announcement, February 3, 2026
11. Regional press reports on Fenner Precision Polymers, UFP Packaging, Sticker Mule and Cherokee Commerce Center 85, December 2025 to August 2026
12. Press reports on the closure of Limestone University, April and May 2025, and Post and Courier coverage, April 2026
13. South Carolina Department of Parks, Recreation and Tourism, Lodging Outlook, January to August 2024
14. CoStar press release, United States hotel industry full-year 2025 performance, January 20, 2026
15. 2026 United States Hotel Development Cost Survey, published July 13, 2026
16. Hampton by Hilton Franchise Disclosure Document summary, 2025, and brand site rate indications, 2026
17. Holiday Inn Express Gaffney property page, IHG, accessed 2026, and hotel directory room counts, Travel Weekly
18. Appalachian Council of Governments regional roadway network data citing SCDOT counts, 2015, and SCDOT I-85 widening reports, August 2025
19. USDA Rural Development eligibility map, Business Programs layer, method of determination