Loan Security Level 2

Question 1

What was your first example?

Answer 1

Hotel, Epsom

Question 2

Walk me through your SWOT analysis

Hotel, Epsom

Answer 2

S = location next to racecourse
W = trade fluctuates based on race schedule
O = find ways to get people in all year round e.g business conferences
T = Cost of living

Question 3

Whats a REO?

Hotel, Epsom

Answer 3

Assumed to run the business efficiently, reflecting typical operational standards rather than exceptional circumstances.

Question 4

How did you come to your view on multiple?

Hotel, Epsom

Answer 4

coming to a view based on comparable evidence of recent hotel transaction with similar characteristics

Question 5

Why did you conclude the property was suitable for loan security?

Hotel, Epsom

Answer 5

We were not provided with the terms of the loan so couldnt comment specifically on them.

But assuming appropriate loan terms, I advised that the property provides stable and secure revenue and profit each year so therefore i am of opinion that it offers suitable security for loan purposes.

Question 6

What are prudent loan terms?

Hotel, Epsom

Answer 6

5 year loan term

Sensible ltv of 60-65%

Question 7

What was the strength of the operator?

Hotel, Epsom

Answer 7

Good - national operator with a load of hotels across the uk

Question 8

Descirbe the hotel

Hotel, Epsom

Answer 8

• The Hotel is comprised of three floors and is of a modern composition.
• It was constructed in 2008 and, as such, no full refurbishments have completed since opening.
• The Hotel is categorised as a budget 3-star property.
• 120 rooms

Question 9

How would a high flood risk influence your valuation?

Hotel, Epsom

Answer 9

It would be an ESG consideration which would be considered in the Valuation and reported

It would potentially have an adverse impact on investor interest and marketability and therefore would be considered in the multiple applied to the property

Question 10

What state of repair was the property in?

Hotel, Epsom

Answer 10

• Following inspection, it was my opinion that the property is in a good state of repair. During our inspection, we did not note any major items of disrepair.
• There has been no significant Capex spent over the past 5 years.

Question 11

How did you arrive at ADR / FMT

Hotel, Epsom

Answer 11

• I reflected an ADR of c.£100 and occupancy of 66% in line with the client’s 2024 Budget
• I deemed this appropriate based on what has historically been achieved at the property and known industry benchmarks.

Question 12

What was your second example?

Holiday Park, Yorkshire

Answer 12

Holiday Park, Yorkshire

Question 13

Describe the location

Answer 13

• The Property is located in the North East of England in East Riding of Yorkshire Council, approximately 15 miles to the northeast of Kingston upon Hull.
• It was located next door to a Haven Far Grange holiday park who are one of the largest corporate operators of holiday parks

Question 14

Describe the holiday park

Answer 14

• c.130 acre site
• Offers both owner caravans and touring. 892 pitches.
• Central facilities include a swimming pool, amusement hall, bar/ restaurant, fish and chip shop, supermarket, fishing lake
• The condition of the site was fair in most places. The condition of the site was fair in most places. The central facilities would benefit from some cosmetic upgrading and areas did appear a little tired and dated

Question 15

Why are coi checks particularly important? Compared to others

Answer 15

COI checks are always important but with loan sec it means you have to check an extra entity in the form of the borrower, even though theyre not your client.

Question 16

Did you proivde an opinion of value on any other assumptions?

Answer 16

Yes, I provided a VP assumption