Deutsche Bank and Bank of America Merrill Lynch are teaming up to fund London & Regional’s purchase of the £575m Atlas hotels portfolio.
The pair are to provide a senior loan of 60% loan-to-value, or around £345m.
London & Regional – owned by the low-profile Livingstone brothers – is also considering taking a mezzanine loan with a detachment point of close to 70%, equating to an additional £65m.
The two banks are working on the deal as equal partners. Deutsche brings experience of underwriting hotel assets to the deal, having been involved in the 2014 financing deals involving Maybourne Hotel Group and the Savoy, WC2, among others.
BAML’s expertise is in financing the purchase of multiple-asset portfolios, such as its recent financing of Blackstone’s Finnish industrial portfolio buy.
The pair have a number of options for an exit on the deal, including a CMBS, which has been BAML’s favoured exit route in recent months.
The relatively high margin on the deal, reflecting the granularity of the underlying assets, is also likely to favour a CMBS.
The Atlas portfolio, which L&R agreed to buy from Lone Star last week, comprises 47 Holiday Inn Express-branded hotels located across the UK.
The 5,575-bedroom portfolio was originally part of the Project Salt and Rock portfolios, which Lone Star acquired from IBRC in 2014.
Lone Star put the portfolio on the open market in October last year for £600m following an unsolicited approach by US private equity firm TPG.
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