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Case Study

Acquisition finance with sculpted amortisation for new build hotel



PE house with a forward commitment to acquire a hotel at practical completion, required amortisation IRR and cash-on-cash yield.
  • Enhanced

    Cash-on-Cash Yield

  • Amount 60% LTV
  • Early Repayment

    Waived after 3 year hold


Deal Outline

Assets

  • £34 million hotel

Security

  • First legal charge on hotel

Income

  • Operating income (but none proven as new build)

Requirements

  • £20m at 60% LTV
  • 5 year term
  • Bespoke repayment profile

Challenges

  • New to market
  • No proven trading history
  • Considerable new supply in area

Facility Secured

  • £20m at 60% LTV
  • Sculpted amortisation, providing enhanced cash-on-cash yield

Summary


Our client, a PE investment house, required finance for its forward commitment to purchase a London hotel following its practical completion. The client, with an extensive UK portfolio, had a strong track record of hands on, active management, and planned to manage the hotel with a specialist hotel operating partner, under a franchise agreement.

 

We performed detailed cashflow and stress-testing analysis on the prospective trading figures to demonstrate the asset’s ability to support the funding sought, despite its lack of track record. By sculpting the amortisation profile in a progressive nature, we secured funding for a 60% LTV facility which achieved a more stable and enhanced cash-on-cash yield (8-9%) over the term versus the outturn from the client’s incumbent lender’s terms.

 

A 5 year term facility was secured which allowed full prepayment after a 3 year hold period with no early repayment penalties.

 


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