£48M Short Term Hotel Finance

• Client: Offshore SPV backed by a Swiss fund
• Facility: £48,000,000 gross
• LTP: 80%
• LTV: 60%
• Term: 18 months
• Rate: 6.35% fixed

Enness was approached by an offshore SPV acting on behalf of a Swiss fund that was looking to acquire a five-star hotel from a receiver. The transaction presented several challenges from a lending perspective: the client had no previous UK hotel experience, no established UK credit footprint and no current trading figures or historic accounts for the hotel.

The funding requirement was substantial, with a gross facility of £48 million. The intention was not simply to acquire the hotel, but to invest in the asset and bring it back to full trading potential, while also extending the facilities into a neighbouring property already owned by the client.

Given the lack of an established trading history, a conventional hotel lender was unlikely to provide the flexibility required. Enness therefore focused on finding a lender that could assess the wider transaction, including the strength of the underlying assets, the proposed plans and the international structure of the borrower.

We secured an 18-month facility at a fixed rate of 6.35%, with the first six months’ interest rolled up before switching to monthly payments in arrears. The facility carried a 1% lender arrangement fee and a 2% exit fee, with lending structured at 60% LTV and 80% loan-to-purchase.

The structure was designed to give the client time to stabilise the hotel and establish a trading track record. Once a year’s trading history had been established, the intention was to refinance onto a mainstream term loan.

Hotel transactions involving international ownership structures can require a particularly tailored approach. The lender needs to understand not only the underlying property and business plan, but also the corporate structure and the experience of the parties involved. In this case, the absence of UK trading history and hotel experience meant the financing had to be structured around the specific circumstances of the acquisition.

This case demonstrates how specialist hotel finance can provide a route forward where conventional lending criteria do not readily fit the transaction. Enness works with lenders experienced in complex and international hotel transactions and can structure facilities around the acquisition, refurbishment or repositioning of hospitality assets.

If you are acquiring a hotel through an international or specialist ownership structure, speak to Enness about your hotel finance requirements and explore the options available for your transaction.

Risk Warning:
Hotel finance carries risks. Hospitality revenues can be affected by changes in trading conditions, operating costs, occupancy and wider market conditions. Development or refurbishment projects can also experience delays or cost increases. Failure to meet the terms of a secured facility could result in enforcement action against the secured assets.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting, project assessment and lender criteria. Terms and availability will vary depending on the transaction, borrower and underlying assets.