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Capital Still Available But More Focused for European Hotel Deals


May 31, 2023
Blackstone's David Gorleku, right, speaks with Eastdil Secured's Stephen Morita at the 2023 International Hospitality Investment Forum. (Sean McCracken)

BERLIN — The availability of financing has been a massive limiting factor across hotels — and all sectors of commercial real estate — globally, but lenders and experts in Europe say capital is still available to get deals done, as long as they fit into the right buckets.

During a panel discussion at the 2023 International Hospitality Investment Forum, David Gorleku, managing director for Blackstone Real Estate Debt Strategies group in London, said the lender is keying in on properties that are poised for success, and the next 12 months should be interesting.

“Generally, we’re going to be focused on the sectors where we think that because of the underlying fundamentals they’ll be able to play through some of the challenges — whether its operating pressure or cap-rate expansion,” he said.

Gorleku said the strongest performance has come from leisure-driven hotels and resorts.

“The sectors that we like and the areas that we focus on haven’t changed dramatically in the current environment,” he said.

Bettina Graef-Parker, managing director of special property finance for Aareal Bank, said her company takes a similar approach and tends to be more conservative while remaining active lenders in a difficult environment.

“We predominantly do senior loans in the 50% to 60% [loan-to-value] range focused on city centers and resorts,” she said. “That hasn’t changed because interest rates have really increased everywhere.”

The lenders on the panel said that growing demand for hotels from business travelers will factor into confidence levels.

Leisure “is performing well and will continue to perform well,” Gorleku said. “Business travel will take longer to come back, but we do actually think it will come back.”

From the equity side, Jens Blomdahl, a principal at KSL Capital Partners based in London, said his firm is “focusing on our core markets,” such as London.

“We’re in the U.K. a lot of time given the large liquidity, higher base rate at the moment, and easier from a structuring perspective,” he said.

Panelists said continued constraints in the debt markets open up some new opportunities, both in the form of distress and for alternative lending platforms.

Blomdahl said opportunities so far have come “in two flavors.”

“First of all, some of the corporate facility lenders have tried to look at doing real estate lending,” he said. “Generally, they haven’t traded or ultimately the borrower favors the flexibility of a corporate facility. Second … in the broader real estate space, as other sectors have trended down, REITs have looked for liquidity, so there’s been asset sales looking to support the other sides of their portfolios.”

Gorleku said lenders have a tendency to step back and make “sure that we believe and have conviction in the sector and the theme that we’re invested in.”

“If we have look at where we want to deploy capital, if we see the resorts or frontline, irreplaceable assets are performing truly well in our own portfolio, that’s an area where we would like to also play on the debt side,” he said.

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