Securitization of private loan for Hotel Construction Financing unleashes network effect of family office

This information is based on a recent successful funding scenario. For the construction of a new hotel, the owner of a hotel group was seeking alternative financing options via a family office. Borrowing from a bank seemed too expensive and the scale of the project was too small for the issue of a bond. There was no question of a capital increase from the issue of shares. Thanks to our flexible platform and the lowest costs possible, even with the smallest volume, the proposal for the securitization of a private loan convinced him. So, the hotel group was able to borrow money inexpensively and without complications and the family office could allow its wider clientele to participate in an advantageous project with a high rate of interest and property with security – a perfect match.

Perfectly formulated comprehensive contract documentation has been designed in close collaboration with the family office. Then, a loan contract between the issue vehicle and the hotel group as the borrower governed the details of the finance. To secure this loan contract, a further contract concerning the collateral deposited in favour of the issue vehicle was concluded. Lastly, the term sheet defines the payment terms of the note. In particular, this governs the terms: The exact match of coupon and interest payments, the perfect documentation of the collateral, and the condition applicable in the event of default on the loan.

The securitization and sale of a loan secured by collateral to several investors in this low-price band is both new and exciting. Especially gratifying is the option for family offices, independent asset managers, and private banks who can, thereby, make full use of their networks so they can offer all groups of clients added value.