The Bannisters Hotel Group consortium were looking to raise senior debt refurbishment funding and subsequent investment funding to assist with the conversion of an existing 3.5 star, older style Ibis hotel into a 4-star, 82 bed Bannisters hotel together with facilities including a signature ‘Rick Stein’ restaurant and a bar. CapStra were asked to help in securing funding from a traditional financier and to maximise leverage within the LVR and ICR tolerances of the financier.
This appointment immediately followed an advisory role which involved the successful refinance of two existing Bannisters hotels located in Mollymook, NSW with a traditional senior debt financier.
CapStra identified a group of traditional financiers and undertook a market approach, preparing an Information Memorandum outlining the opportunity and financing request. To support the market approach and absent a valuation, we instructed a reputable third party hotel consultant to undertake a demand study for the proposed hotel and provide an independent appraisal on the forward cash flow projections of the operator.
CapStra then procured offers from various financiers and following a period of negotiation, shortlisted two parties to take through the credit approval process and instructed a valuation and QS report utilising firms that were on the panels of the two shortlisted financiers. We also provided full oversight during the credit approval process and facilitated the process through to financial close.
Placement of the required funding with a traditional financier, who in the current environment, was prepared to advance refurbishment finance of up to a 55% LVR toward the creation of a brand new hotel offering in a regional location (Bannisters has no track record in the Port Stephens area, though they have demonstrated experience/infrastructure associated with the operation of two similar assets located in Mollymook, which they will leverage).
Use of the competitive tension created in the market process to obtain a cost effective funding solution for the Borrower at a relatively high level of leverage, thereby minimising the equity contribution of the Sponsors. The process also assisted in limiting the recourse requirements of the Sponsors.
CapStra was mandated to raise $23.4m (equivalent to 65% of total equity) in preferred equity and $110m in peak senior construction debt to assist with the development of 202 residential apartments and 1,177m2 of retail NLA in Sydney’s Inner West.
