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A Henry Stewart Briefing

Hotel Funding

Chairman
Russell Kett
Managing Director
HVS International

Speakers
Dominique Bourdais
Director
HVS International

Daniel Braham
Hotel Group
Berwin Leighton Paisner

Chris Eddis
Managing Director
Mornington Capital

Peter Gee
Director
Advisory Services
Humberts Leisure Ltd

Arthur De Hast
Managing Director Europe
Jones Lang LaSalle Hotels

Martin Muirhead
Partner, Head of Property
Kingston Smith

Gerard Nolan
Head of Hotels
FPD Savills

Bob Silk
Relationship Director Hotels Team
Barclays Bank Plc

Serge Sonti
Director of Hospitality Analysis
CB Richard Ellis Hotels Limited

THE INSTRUMENTS AND THEIR CHARACTERISTICS

Loan Terms, Pricing and Loan Structures

  • The bank financing market
    - What is the effect on pricing and loan terms?
    - Watching out for the small print (hedging, default)
  • Increased bank due diligence and controls
    - Who is taking the risk?
  • The different loan structures available, how and where can they be used?
    - Recourse vs non-recourse loans
    - Development loans vs long term takeout finance
    - Mezzanine and equity kickers
    - Conduit program loans

Chris Eddis, Managing Director, Mornington Capital

 

Documentation Issues for Funding Transactions

  • Equity funding
    - Letters of intent
    - Joint ventures
    - Shareholder agreements
    - Partnerships
    - Real estate funds
    - Asset purchase agreements
  • Debt funding
    - Commitment letters
    - Secured loans
    - Mezzanine loans
    - Subordinated debt
  • Emerging capital sources
    - Sale/leasebacks
    - Collateralised debt obligations
    - Securitisations
  • Underlying commercial agreements
    - Construction contracts
    - Leases
    - Management contracts
    - Franchise agreements

Daniel Braham, Hotel Group,
Berwin Leighton Paisner

 

THE MARKET & THEIR TERMS

The Lenders

  • Lenders behaviour during the 90’s recession
  • Lenders’ behaviour through the recent cyclical downturn
  • The current “universe” of lenders to the industry
  • Who is providing the finance?
  • What will they finance?
  • What are the terms?
    - The returns and the margins
    - Interest rates
    - What are the costs involved?
    - Gearing levels considered for different projects
  • What are the risks?
  • Assessing proposals
  • Present trends
    - Leverage multiples
    - Pricing
    - Covenants
    - Flexibility
  • How to choose your lender
  • A look at some of the current deals being done for new developments and acquisitions
  • Current trends and the outlook for the future

Bob Silk, Relationship Director, Hotels Team, Barclays Bank Plc

 

The Investors

  • Trends in volume of hotel transactions across Europe
  • Lessons from the hotel market over the past 12 months – deals done/not done
  • Why the market is hot at present
  • Key players – the major activity and who has been involved
    - Who is buying: investor type and buyer origin
    - What are they buying
    - Why?
    - Who has provided the funding?
  • What is selling and why?
  • How long will the bull market last?

Arthur De Hast, Managing Director, Europe, Jones Lang LaSalle Hotels

 

Non-traditional Investment Structures

  • Review of recent investment deals
    - Who has done them and on what terms
  • SDLT and the impact on new hotel leases
    - New rules lead to innovative alternatives
  • Sale and management-back arrangements
    - Long-term viability and the value of guarantees
  • Collective Investment Schemes
    - Defining the right stock and innovative call-back options

Serge Sonti, Director of Hospitality Analysis, CB Richard Ellis Hotels Limited

 

Structuring Funding Transactions – Tax

  • Tax issues when acquiring hotels
  • Tax issues when disposing of hotels
  • Structures available for acquisition and operation of UK hotels
  • Overseas investors and UK hotels
  • Stamp duty – the current situation
  • REITS/PIFs – current thinking

Martin Muirhead, Partner, Head of Property, Kingston Smith THE SECTORS - IN DETAIL

 

5 Star Capital Centre Hotels and Business Hotels

  • Interest Rates - where are they going and the effect they will have on business hotels
  • LTVs on leases, management contracts and franchises
  • Security of the income on 5 star and business hotels
  • Key points to look for when funding
  • Opportunities and future trends for the sector

Gerard Nolan, Head of Hotels,
FPD Savills

 

Sun Seeker Resort Hotels and Mixed Use Hotels

  • Market trends - towards mixed use
  • Components of mixed use - resort and urban
  • Financing advantages
  • Recent innovations in financing methods
  • Resort funding examples

Peter Gee, Director, Advisory Services, Humberts Leisure Ltd

 

Road Side Inns and Budget Hotels

  • Performance of hotels in this sector
  • Is the UK market for budget hotels saturated?
  • Is the European market for budget hotels saturated?
  • What do investors and funders think – is there risk? What risk?
  • Why should you invest in this sector?
  • Who is investing in this sector?
  • How to get funding
  • Where to get funding from

Dominique Bourdais, Director,
HVS International

 

Serviced Apartments and Extended Stay Hotels

  • What opportunities are there for serviced apartments and extended stay hotels in UK and Europe?
  • Why are these hotels more interesting to fund?
  • What are the secrets of being successful in this market?
  • Why is it not more developed in the UK and in Europe – as it is in the USA?
  • Why it makes more sense for funders to fund extended stay hotels
  • Is there funding available?
  • Obtaining successful funding
  • Investors’ sentiment on the extended stay market

Dominique Bourdais, Director,
HVS International