Arc & Co

Arc & Co structures loan in excess of £100m to support the refinancing of four Hilton Hotels

Arc & Co has arranged a multi-million-pound loan with an affiliate of Lone Star Real Estate Fund VI to support The Ability Group’s refinancing of four Hilton Hotels.

The group has built a significant presence within the UK and European property markets across the residential, commercial and hotel sectors, with a 14-hotel portfolio currently in the UK.

Private equity firm, Loan Star, provided the debt facility — which is in excess of £100m — to Ability Hotels to aid the refinancing of Hilton Liverpool, Hilton Dunblane Scotland, Hilton London Syon Park and Luton Hampton by Hilton.

“We have seen a recent wave of liquidity from private equity funds and investment banks that are well positioned with strong appetite to fund operational commercial assets,” said Edward Horn-Smith, managing director at Arc & Co (pictured above).

“These funds are plugging the gap of typical bank lenders that have fallen short of the mark.”

He explained that banks usually lend on historic performance, while private equity funds will look at hotels’ forecast returns.

With the hospitality sector witnessing little stability and volatile income during the pandemic, Edward urged for a “categoric change” as to how these loans are assessed so that more lenders look at predicted performance over the next two to three years to support these businesses in trading again.  

This transaction is said to be the first of several large commercial loans Arc & Co expects to execute in Q3 and Q4 this year.

This includes a further five transactions in the hotel and student accommodation sectors, totalling £207.5m.

All of these cases are set to be financed using ‘special situation funds’ and not via traditional banks, enabling a ‘ramp-up’ period so that operating income can increase and stabilise over a two- to three-year period.

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