Following our second in a four-part series of Reed Smith Restructuring & Insolvency Roundtables, we take a temperature check this time on the real estate market.

Key takeaways were:

1. Busy Q4 real estate transactional activity predicted.
2. Use of option structure to manage deal execution risk.
3. Generative AI seems to be increasingly utilized by businesses.
4. No drop in hotel values in 2024, leisure and corporate travel back to pre-pandemic levels by 2025.
5. Availability of private credit reducing/delaying use of restructuring techniques/procedures.
6. Biggest concerns include interest rates, war, inflation and changes in governments.
7. Private credit slow to enforce, however distress in certain parts of hospitality, care-homes, casual dining evident.
8. Most companies now implement a flexible working policy of 3 days in the office.
9. Restructuring plan use for mid-market business including e.g. Tasty plc, Prezzo.
10. E&S of ESG – diligence up and down supply chain required for in scope business (including franchises).

James Lee, Head of Asset Management at Earlsfort Capital, who attended our most recent roundtable explained that the approach to funding at Earlsfort Capital Partners is:

We look to back the right Sponsors and then work out a suitable proposition that works for both parties.

With a footprint in London, Dublin and US Earlsfort Capital Partner’s sweet spot is 10,000,000-100,000,000 ticket size in the real estate finance space.

In addition, Kenneth Hatton, Head of Hotels Europe CBRE, commented:

Private Equity is attracted to the hotel sector by the ability to drive income improvement through various levers, including capex projects to both elevate the guest experience and improve building efficiencies, re-branding to help visibility and distribution, and improvements in operational efficiencies.