Hotel construction finance in the UK and Europe can be arranged with rates starting at the Bank of England base rate +4% for the construction phase and rolling onto a term facility at only 2-2.75% over Bank of England base rate for the remaining agreed term.
The amount raised against construction is normally based on a % of total project costs including construction costs but also considers how much the final facility amount will be, which is based on a multiple of EBITDA.
Presentation is essential, and it is important that the following documentation is ready to present to banks and other lenders at the initial enquiry stage;
- A cost appraisal, normally in Excel/Worksheet format
- A business plan/funding proposal
- Directors CVs/business experience
- Assets & liabilities statements for the directors and shareholders
- Details of contractors
- Architects plans
- Details of all professionals involved i.e. architect, project manager, structural surveyors etc.
Belgravia Property Finance ensures that the initial enquiry is presented in the best possible way with enough detailed information for lenders to become interested parties in the project.
Renovation of an Older Property
Considerably cheaper in terms of the build cost than ground-up development, and in many ways easier to fund, many hotel developers are renovating existing hotels or obtaining permission to turn commercial buildings such as offices into hotels. The benefits can be significant with this approach.
Mainstream banks are a major source of funds for hotel construction and development finance, however, there are many challenger banks and private development finance companies that offer products that banks do not.
The benefits of non-bank and challenger banks products are that a higher percentage of total project costs can be raised, and lenders may be more flexible towards clients with less development or hotel investment experience, albeit rates and fees will be slightly higher than mainstream banks.