Starwood’s listed debt vehicle, Starwood European Real Estate Finance Limited (SEREFL), is to buy a £75 million mezzanine loan secured by a portfolio of UK hotels for £73 million, PDI sister title Real Estate Capital has reported.
The firm said that the debt is the mezzanine component of a bank financing of a portfolio of UK budget hotels. The mezzanine strip has a five-year term and has a floating-rate of interest.
The loan is secured against assets in the so-called Atlas portfolio of 47 Holiday Inn Express hotels, which London & Regional bought in April this year, according to CoStar News. The investor bought the portfolio from US private equity firm Lone Star for more than £500 million. Lone Star had acquired the portfolio through the purchase of non-performing loans from the Irish Bank Resolution Corporation (IBRC) in 2014.
The Atlas portfolio was put together following Lone Star’s acquisition of the Project Rock loan book and comprised the former Somerston and Morethan hotel operations.
Deutsche Bank and Bank of America Merrill Lynch provided a £345 million financing of the portfolio for London & Regional in April, according toEstates Gazette at the time. The loan reflected a circa 60 percent loan-to-value ratio.
SEREFL has issued new shares to fund the £73 million purchase. The company said that it has issued more than 70.8 million shares at a price of 103.05 pence per share, reflecting a premium of around 2.75 percent to the net asset value per ordinary share at the end of July.
“The company is raising £73 million to make an attractive loan investment,” said Stephen Smith, the company’s chairman. “These are exciting times for alternative lenders in real estate, and it is to the company’s benefit that the placing and recent repayments in the portfolio will on completion of the placing leave the company with a cash balance of approximately £26 million available for future lending and existing commitments.”