Why Cheyne backed high-end hotels with a €200m-plus loan

The manager, which has financed KSL-backed Beaumier, is seeing consumers shift focus away from mainstream brands.

London-based debt fund manager Cheyne Capital Real Estate is backing the European high-end ’lifestyle’ hotels sector after observing a shift in consumer behaviour to an ‘authentic’ experience instead of mainstream hotel brands.

Last week, the firm originated a €200 million senior secured facility for European leisure hospitality platform Beaumier. The loan, provided by funds managed and advised by Cheyne’s real estate group, will be used to refinance existing bank facilities and support an ambitious capital expenditure programme aimed at enhancing the experience delivered by the hotels.

The Beaumier platform, which is backed by US private equity firm KSL Capital, consists of 12 lifestyle hotels in high-end leisure locations in France – including the Alps, Provence, and the Cote d’Azur – plus , Switzerland and Spain’s Balearic Islands.

“The high-end ‘lifestyle’ market share is growing because of operators’ and hoteliers’ increased focus on the changing demands of consumers, more and more of whom are moving away from mainstreams brands and instead favour hotels that offer more authenticity, connection with local communities, greater sustainability and, overall, an enhanced experience,” Antoine-Julien Richard, loan originator at Cheyne, told Real Estate Capital Europe.

Cheyne acknowledged that the lending market is in a precarious situation due to macroeconomic and geopolitical concerns, but said it remains bullish on opportunities in the sector.

“Lending conditions are currently hampered by several macro factors including the war in Ukraine, double-digit inflation and an increase in commodity prices,” Richard added. “But there are still attractive lending opportunities to be found and Cheyne has been active in providing financing to selected sponsors with solid track records and hotels in prime locations.”

At Real Estate Capital Europe’s Borrowers and Lenders Forum in London in June, the common consensus was that although lenders had been hesitant to deploy capital into the hotel sector because of the covid-19 pandemic, a strong recovery was taking place.

Property consultant Savills reported that €16.1 billion was invested into the European hotel sector in 2021, an increase of 61 percent year-on-year. This summer, average daily rates were 6 percent higher than pre-covid, according to figures released in June by STR, the global data provider.

“We expect to see continued challenging lending conditions. However, we also think there will be opportunities for selective lenders who are willing take a long-term view to support capital expenditures programmes and platform building,” Richard added.

Earlier this year, Cheyne closed its seventh iteration of its real estate credit series,  receiving £1 billion in commitments. The diversified Cheyne Real Estate Credit Fund VII focuses on providing debt in Europe. The latest vehicle is already 60% deployed.