Blackstone is searching for £550m of fresh debt for an early refinance of its European Mint hotels portfolio, Real Estate Capital can reveal.
The private equity firm has appointed Eastdil Secured to source the finance. The proactive move will decrease the company’s cost of debt and offers Blackstone the opportunity to take cash out – a strategy beginning to be replicated by other big ticket borrowers taking advantage of the competitive debt market.
The finance currently in place is due to expire in 2016. A £375m package was closed in 2011 with a £300m senior loan from Deutsche Bank and a £75m mezzanine tranche from DRC Capital. The senior debt was reported at the time to have been priced at 300 bps over LIBOR.
Blackstone bought the portfolio of eight hotels for around £600m from Lloyds Banking Group, the bank having taken control of the assets after a breach of covenant on its £450m loan to the company. The portfolio includes two hotels in London in Westminster and near the Tower of London, and one each in Birmingham, Manchester, Leeds, Bristol, Glasgow plus one in Amsterdam.
The portfolio is now valued at £760m, meaning a new loan at £550m would be at a loan-to-value of 72.4%. Whole loan as well as senior and mezzanine providers are expected to compete for the mandate.
In August the owners of The Savoy in London’s West End, Kingdom Hotel Investments and Lloyds Banking Group, employed a similar strategy by agreeing an early refinance – putting in place £300m of debt, comprising £200m of senior from Deutsche Bank and £100m of mezzanine from Apollo Global Management – only 18 months after its existing finance was arranged with Crédit Agricole CIB and DekaBank.
In May Starwood Capital refinanced its Principal Hayley regional hotel business with a £330m loan with Morgan Stanley, just 15 months after it bought the hospitality company for £360m with £200m of debt from Citigroup.