FRP Real Estate Advisory has completed an £85m facilities package from a high street bank secured against a portfolio of three owner-operated hotels in the South West, supporting the borrower's next phase of growth.
Cameron Hayes, director at FRP Real Estate Advisory, led the transaction on behalf of a privately owned hotel group with a 20-year operating track record. The portfolio comprises one established, fully operational site alongside two recently refurbished hotels that are currently stabilising and ramping up trading.
The facility is made up of a £75m bilateral loan on a five-year commitment, refinancing the incumbent lender, together with a further £10m committed accordion, an additional tranche of funding released once conditions are met, to be drawn as the two newly refurbished hotels open and stabilise.
The loan is structured on an interest-only basis with a bullet repayment at the end of the commitment term.
- Margin ratchets from 1.9% above SONIA (the Sterling Overnight Index Average, the benchmark reference rate) at leverage above 9.5x
- Margin falls to 1.6% above SONIA once leverage drops below 7x
- The same pricing mechanics apply to the accordion
The process involved several structural turns before reaching its final form. The mandate began as a mezzanine financing request, and FRP ran a full process across the mezzanine and whole loan markets before concluding that a senior structure with an accordion mechanism delivered materially better value. Multiple credible options were available throughout given the borrower's profile and track record; the value lay in identifying the right one rather than simply securing terms.
"With a borrower of this calibre, options were never the constraint, selecting the right structure was," said Cameron Hayes, director at FRP Real Estate Advisory.
"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."
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