City hotel contract re-negotiation
To deal with the performance downturn during the pandemic, we supported the owner of this city hotel with re-negotiating the lease terms laying the groundwork for an operator search for their city property
Details of the project
>> Value created for our client
The fund now has a lease contract which reflects current pandemic times taking pressure off the operator, however, ensuring a participation in the eventual upswing. Additionally, the fund managers know what other terms the property could reach in the open market and therefore have all information to take the best decision.
>> Our role
In a first step we evaluated the current situation of the hotel property during the pandemic and estimated a sustainable rent level during that distressed time.
In a second step we modelled various contract mechanics which on the one hand do not overload the property and operator but still maintain some cash inflow for the real estate fund.
As a third step we started re-negotiating different terms with the current hotel operator. At the same time we reached out to other hotel operators to gauge the interest in the market for such a property.
Ultimately we agreed new lease terms with which the property owner and mechanisms on how the fund can participate when property revenues go over a certain threshold.
>> Where is the client now
The fund continually observes the situation and has the tools and the knowledge to adapt the contract when and where necessary.