A UK-resident single family office approached Hectocorn to fund the acquisition of a 78-key five-star boutique hotel in Central London. The family had built its wealth outside hospitality and was entering the sector for the first time, buying a stabilised trading asset with an established independent operator already in place.
The purchase price was £64 million — roughly £820,000 per key. The family could fund the equity comfortably. What it could not do was persuade its existing private banking relationships to lend against an operating business rather than bricks and mortar.
Hectocorn structured a £42 million senior acquisition facility at 65% loan-to-value, priced at compounded SONIA plus 285 basis points over a five-year term, with a UK challenger bank running a dedicated hospitality book.
Client Requirement
The client needed an acquisition facility that would:
- Fund 65% of the purchase price without cross-collateralising the family’s wider property portfolio
- Accept a first-time hotel owner as sponsor, on the strength of the incumbent operator
- Complete inside a 16-week exclusivity window agreed with the vendor
- Avoid a full personal guarantee from the principals
- Leave headroom for a £4–5 million soft refurbishment in years two and three
Discretion mattered as much as terms. The family did not want the acquisition circulating around the London broker market, which ruled out a broad, untargeted approach to lenders.
The Challenge: Sponsor Inexperience in a Selective Lending Market
UK hotel debt has been available through 2026, but on narrow terms. HVS reported in January 2026 that senior sterling facilities for prime hotel assets were being written at 55–65% loan-to-value with margins in a broad L+180–375bps range, and that credit committees were focused on cash-flow sustainability, sponsor track record and downside protection. A first-time hotel sponsor sits awkwardly against two of those three tests.
The London trading backdrop was also more nuanced than the headline numbers suggested. PwC’s 2026 forecast put London ADR at £193.50 with occupancy at 81.6% and RevPAR at £158.80. But occupancy softened through spring — April 2026 saw London occupancy fall to 77.4% from 78.9% a year earlier as international travel patterns shifted.
Against that, the luxury segment continued to outperform the rest of the market. The most recent full-year London data showed luxury RevPAR growth of 5.3% against a 1.8% decline in the economy segment, with the gain driven almost entirely by rate — ADR up 5.0% year on year. That is a useful signal for a credit committee, because it says the spending propensity of higher-income guests is holding even as volume softens.
Supply was the third factor. Up to 30 hotels were scheduled to open in London during 2026, including the Six Senses (109 keys) and the St. Regis at the former Westbury (196 keys). Any credit paper had to address what new luxury supply would do to the subject asset’s rate position.
The underwriting question was therefore not “is this a good hotel?” It was “who is actually running this, and what happens to cover if rate growth stalls?”
Outcome
Hectocorn secured a £42 million senior acquisition facility. The agreed structure comprised:
- £42,000,000 senior term loan at 65% loan-to-value
- Compounded SONIA + 285 bps — approximately 6.6% all-in at drawdown, against a SONIA reference of 3.73%
- Five-year term, interest-only for the first 24 months, then 1% per annum amortisation
- Minimum interest cover ratio of 1.35x, tested quarterly on trailing twelve-month EBITDA
- Capped sponsor recourse rather than a full personal guarantee
- An accordion allowing a further £5 million capital expenditure tranche, pre-agreed at close
- Security limited to the asset-owning SPV, with no charge over the family’s wider portfolio
Heads of terms were agreed nine working days after the lender received the information memorandum. The facility completed 14 weeks from instruction, inside the vendor’s exclusivity window.
Hectocorn Engagement
The sponsor’s inexperience was the central issue, so we built the case around the operator rather than around the family. Our work covered:
- Restructuring the management agreement so lender-relevant protections — performance tests, termination rights and a step-in mechanism — were explicit in the documents rather than assumed
- Building a three-scenario trading model with a downside case that held occupancy flat at 75% and assumed zero rate growth, demonstrating that cover stayed above 1.20x even then
- Commissioning an independent competitive-set study benchmarking the asset against the incoming Six Senses and St. Regis to quantify realistic rate erosion
- Approaching a shortlist of six lenders with demonstrated Central London hotel appetite, rather than circulating the opportunity broadly
- Negotiating recourse down from a full guarantee to a capped obligation falling away on delivery of two consecutive quarters above 1.40x cover
- Coordinating the BVI holding structure with the client’s tax counsel so security took effect at the correct level
Four of the six lenders approached issued indicative terms. Competitive tension moved pricing 40 basis points and removed a cash sweep the leading bank had initially proposed.
Impact
The completed facility gave the family:
- Entry into UK hospitality at institutional leverage, on their first transaction in the sector
- A ring-fenced structure leaving the wider portfolio unencumbered
- Pre-agreed capital expenditure capacity, avoiding a second financing exercise in year two
- Personal liability capped and time-limited rather than open-ended
- A lending relationship with a bank that will consider further hospitality acquisitions
The transaction illustrates a pattern we see repeatedly. Where a sponsor lacks sector track record, the operator’s covenant and the quality of the management agreement do the work. Presented properly, they can substitute for the experience a credit committee would otherwise want to see.
Key Deal Highlights
Facility type: Senior acquisition loan
Facility amount: £42,000,000
Purchase price: £64,000,000
Loan-to-value: 65%
keys: 78
Price per key: c. £820,000
Margin: Compounded SONIA + 285 bps
Reference rate at close: SONIA 3.73% (23 July 2026)
Indicative all-in cost: c. 6.6%
Term: 5 years
Amortisation: Interest-only for 24 months, then 1% p.a.
ICR covenant: 1.35x minimum, tested quarterly
Time to heads of term: 9 working days
For more on acquisition finance solutions for cross-border Hotels, get in touch with Hectocorn.
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Frequently Asked Questions
For a stabilised, well-located Central London hotel with a credible operator, 60–65% loan-to-value is the realistic senior debt range. HVS reported UK senior hotel lending at 55–65% LTV for prime assets at the start of 2026, and that band has held. Higher leverage is achievable but generally requires a mezzanine or stretch-senior layer priced materially above senior debt, and lenders will want to see either a strong sponsor track record or an unusually robust operating agreement. Trophy assets in the very strongest locations occasionally clear 65%, but that is the exception rather than the rule.
Yes, though the financing has to be built differently. Lenders assess hotels as operating businesses, so where the sponsor has no sector history the operator becomes the credit story. In practice that means a management agreement with genuine performance tests, a lender step-in right, and an operator whose own balance sheet or brand carries weight. A first-time sponsor with a strong operator and conservative leverage is a more financeable proposition than an experienced sponsor with a weak operating platform. Expect more diligence and a slightly longer timetable.
Sterling senior hotel debt is priced over compounded SONIA, which was 3.73% as at 23 July 2026. HVS put UK hotel margins in a range of roughly 180 to 375 basis points at the start of 2026, with the tighter end reserved for prime, stabilised, well-sponsored assets. A margin of 275–300bps on a strong Central London asset is a reasonable expectation, putting all-in cost around 6.5–7.0%. Pricing moves with leverage, sponsor quality, operator strength and whether the lender is a clearing bank, a challenger bank or a private credit fund.
Frequently, but it is negotiable. Guarantees are most commonly required where the sponsor is new to the sector, where leverage is above 60%, or on development transactions. On stabilised acquisitions it is often possible to negotiate a capped recourse obligation, or a guarantee that falls away once the asset delivers agreed cover for a defined period. The trade-off is usually against pricing or leverage. Being clear early about which of those matters most to you shapes how the negotiation runs.
Twelve to eighteen weeks from instruction to drawdown is typical, assuming a clean title and a co-operative vendor. Indicative terms can be obtained much faster — often within two weeks, and sometimes within 48 hours where the asset and sponsor are straightforward. The bulk of the timetable sits in valuation, an operator report, and legal due diligence on the management agreement. Where a vendor has set a tight exclusivity window, running the valuation instruction in parallel with credit approval rather than sequentially is usually where the time is saved.
It adds a layer of work rather than a barrier. BVI, Jersey, Guernsey and Luxembourg holding structures are routine in UK hotel ownership, and lenders active in the sector are used to them. The issues to resolve early are where security attaches, whether the lender needs a charge over the offshore shares as well as the UK asset, and how withholding tax is handled on interest payments. These are solvable, but they need the tax adviser and the lender’s counsel talking to each other from the outset rather than at signing.
IMPORTANT: The case studies featured on our website are based on genuine client enquiries and transactions handled by Hectocorn. All personal and identifying details have been anonymised to protect the privacy and confidentiality of those involved.
Case studies are published for illustrative and marketing purposes only, to provide context around the types of financing we arrange and the outcomes we achieve for our clients. In some instances, a case study may draw on elements from more than one transaction to better illustrate a particular scenario.
Please be aware that not every enquiry we receive results in a completed transaction. Where a case study is based on an enquiry rather than a concluded piece of business, this does not represent a completed deal. The publication of any case study on this website should not be interpreted as confirmation that the underlying transaction was finalised.