FRP Real Estate Advisory has arranged a £95 million facilities package for a privately owned hotel group operating three properties in the South West of England. The financing, provided by an unnamed high street bank, will support the operator’s expansion plans.
Cameron Hayes, director at FRP Real Estate Advisory, structured the transaction for the hotel group, which has operated for 20 years. The portfolio includes one fully operational site and two recently refurbished properties currently ramping up trading.
Facility structure
The package comprises a £75 million bilateral loan with a five-year commitment, refinancing the existing lender, plus a £10 million accordion facility. The accordion represents additional committed funding to be released as the two refurbished hotels stabilise operations.
The loan is structured on an interest-only basis with bullet repayment at term end. Pricing starts at 1.9% above SONIA at leverage above 9.5 times, falling to 1.6% above SONIA once leverage drops below 7 times. The same pricing mechanics apply to the accordion facility.
Transaction evolution
The financing request initially focused on mezzanine debt. FRP evaluated options across mezzanine and whole loan markets before determining that a senior facility with an accordion mechanism offered better value for the borrower.
“With a borrower of this calibre, options were never the constraint, selecting the right structure was,” Hayes said. “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.”
The transaction marks FRP’s fourth engagement with the hotel operator. The financing comes as the hospitality sector continues to navigate post-pandemic recovery, with commercial property development activity showing mixed regional performance.
The South West hotel market has seen varied trading conditions, with coastal and leisure destinations experiencing stronger demand than urban centres. The refinancing provides the operator with structured capital deployment aligned to operational milestones at the two refurbished properties.
While other property sectors face profitability pressures, established hotel operators with proven track records continue to access competitive senior debt terms from mainstream lenders.
