Full Service Hotels - Client Profiles

Challenger bank

Brief

Value the freehold interest in an established country house hotel for investment and renovation purposes. The business has been owned by the same family for over 30 years.

Property

26 letting bedrooms, with a significant food and beverage offering.

Result

A detailed analysis of the accounts and future trading potential (in the hands of a reasonably efficient operator - REO) helped the bank identify/strip out any personal goodwill, as the borrower had traded the property for 30 years+

Private client

Brief

Value the freehold interest in a 52-bedroom hotel, for loan security purposes - to enable the owners to purchase another business.

Property

The hotel had recently been extended and refurbished and a large bar doubling as a breakfast area was created on the ground floor from a previously under used restaurant/conference space. The hotel benefitted from strong leisure and tourism trade and also from a growing midweek corporate trade.

Result

Following the completion of the extension, the hotel had yet to trade at full potential, therefore we based our valuation on a discounted cash flow forecasting the improved trade performance, based on benchmarking the trade at similar hotels.

National bank

Brief

Value a 33-bedroom hotel, for secured lending purposes. The leasehold interest in the property was to be valued as a fully equipped and operational entity having regard to trading potential.

Property

The leasehold interest was held by way of a new 55-year lease with significant lease obligations for required refurbishment works as well as lease premiums payable.

Result

Trading accounts were reviewed as well as accountant projection figures following the refurbishment works. A traditional profits-based valuation approach was deemed inappropriate in this instance and the property was instead valued by adopting a Discounted Cash Flow with a Market Value of around £1,500,000.

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