Bridging The Leasehold Gap – a new structure for Owners
There are fundamental issues in the European hotel market:
- There is limited interest, from credible parties, in acquiring leaseholds, the bid-ask gap is too large and the market is broken
- If there is interest in taking a lease, the coverage required is generally >1.5x EBITDAR
- Hotel brands and many investor vehicles will not take staff
- Many owners prefer a Prop Co and high fixed lease payments
- Debt providers will only finance pure real estate with a proven operator attached
Result = either no development, or a poor operator and / or a poor yield
RoundApple can step in to provide the solution, where appropriate becoming one or both of the leaseholder and employing entity.
This enables world class hotel operators to sign up to a franchise or management contract, as none necessarily must take on an operational entity with staff and other liabilities.
Moreover, debt providers can lend directly against Prop Co and get a better mortgage, driven off a higher fixed rent, meaning greater access to debt and a higher LTV.