FRP Real Estate Advisory has arranged an £85m high street bank funding package secured against three owner-operated hotels in the South West.
The transaction supports a privately owned hotel group with a 20-year operating track record and refinances its incumbent lender.
The portfolio comprises one established and fully operational hotel alongside two recently refurbished sites which are stabilising and increasing trading activity.
Cameron Hayes, director at FRP Real Estate Advisory, led the transaction on behalf of the borrower.
FIVE-YEAR FACILITY
The package comprises a £75m bilateral loan with a five-year commitment and a further £10m committed accordion facility.
The accordion is released as the two refurbished hotels open and stabilise, allowing the borrower to access additional capital as value builds.
The loan is structured on an interest-only basis with a bullet repayment at the end of the commitment term.
Pricing starts at 1.9 percentage points above SONIA when leverage exceeds 9.5 times, reducing to 1.6 percentage points above SONIA once leverage falls below seven times. The same pricing mechanism applies to the accordion facility.
STRUCTURE EVOLVES
The mandate begins as a request for mezzanine finance, with FRP running a process across the mezzanine and whole-loan markets.
The adviser subsequently concludes that a senior facility with a committed accordion provides materially better value for the borrower.
FRP says the client’s profile and track record generate several credible funding options, meaning the challenge is identifying the most appropriate structure rather than simply securing terms.
Hayes says: “With a borrower of this calibre, options were never the constraint – selecting the right structure was.
“We explored several routes before arriving at a senior facility with a committed accordion, which gives the client capital as value builds rather than requiring them to pay for it upfront.
“Long-standing relationships with the lender’s hotel team were central to getting a structure of this complexity agreed at pace. This is our fourth transaction with the client, and it’s a genuine pleasure to keep supporting a business with this much ambition.”
