Key Takeaways
- • A&O Hostels secures €874 million multi-year refinancing facility from Apollo, replacing an existing facility and enabling execution of a second €500 million expansion phase across European markets.
- • Portfolio doubling target within five years: The hostel chain, jointly owned by StepStone Group and Proprium Capital Partners, plans to expand its 44-property portfolio across 32 major European cities, backed by strong operational performance and bed additions of approximately 11,500 units since the 2023 acquisition.
- • Refinancing secured against high-performing asset base: The senior loan is collateralized by A&O's current portfolio of 44 hostels, which collectively operate approximately 30,000 beds and have demonstrated resilience and outperformance despite sector fragmentation.
- • Strategic asset acquisitions and adaptive reuse in pipeline: Capital deployment includes a €40 million conversion program converting a former Berlin office building into a flagship 2,500-bed property near Checkpoint Charlie, exemplifying the company's development capabilities and growth strategy.
- • Institutional validation of hostel sector fundamentals: Apollo's continued commitment signals growing institutional confidence in budget accommodation's structural demand drivers, including rising tourism and cost-conscious consumer spending, positioning A&O to capitalize on fragmented market consolidation opportunities.
Summary
A&O Hostels, Europe's largest hostel chain owned by StepStone Group and Proprium Capital Partners, has completed an €874 million refinancing facility with funds managed by Apollo. The senior multi-year loan replaces an existing Apollo facility and is secured against the company's portfolio of 44 high-performing properties across 32 major European cities. This refinancing marks a critical juncture in A&O's growth trajectory, enabling deployment of a second €500 million expansion phase following StepStone and Proprium's management-led acquisition of the platform in late 2023, which initially backed a €500 million expansion program.
The capital structure reflects disciplined execution. Since the 2023 acquisition, A&O has added approximately 11,500 beds through strategic acquisitions and developments in key markets including London, Manchester, Berlin, and Brussels. The company now operates roughly 30,000 beds across Europe. The refinancing will support continued growth in core European markets while maintaining the operational discipline that has characterized the platform's performance. Josh Cleveland, head of EMEA at StepStone Real Estate, emphasized that "Apollo's commitment to extending this relationship on competitive terms is a strong endorsement of the strategy – and of the partner group delivering it."
A&O's growth strategy extends beyond traditional acquisitions to include adaptive reuse conversions. A €40 million development program is underway to convert a former office building in Berlin into a flagship 2,500-bed property near Checkpoint Charlie, leveraging the company's in-house development capabilities. This conversion exemplifies the firm's ability to unlock value in underutilized real estate while expanding capacity in high-demand European markets.
The refinancing underscores institutional recognition of structural tailwinds in budget accommodation. Proprium Capital Partners' Philipp Westermann noted that despite the sector's "highly defensive characteristics and outperformance in recent years," the hostel market remains fragmented, presenting consolidation opportunities. Ben Eppley, partner and head of real estate credit at Apollo, affirmed that "A&O has executed on its accelerated growth strategy ahead of schedule whilst remaining highly disciplined." Apollo's continued financing partnership signals confidence in the sector's resilience and A&O's ability to capture market share through disciplined capital deployment and operational excellence.
The capital structure reflects disciplined execution. Since the 2023 acquisition, A&O has added approximately 11,500 beds through strategic acquisitions and developments in key markets including London, Manchester, Berlin, and Brussels. The company now operates roughly 30,000 beds across Europe. The refinancing will support continued growth in core European markets while maintaining the operational discipline that has characterized the platform's performance. Josh Cleveland, head of EMEA at StepStone Real Estate, emphasized that "Apollo's commitment to extending this relationship on competitive terms is a strong endorsement of the strategy – and of the partner group delivering it."
A&O's growth strategy extends beyond traditional acquisitions to include adaptive reuse conversions. A €40 million development program is underway to convert a former office building in Berlin into a flagship 2,500-bed property near Checkpoint Charlie, leveraging the company's in-house development capabilities. This conversion exemplifies the firm's ability to unlock value in underutilized real estate while expanding capacity in high-demand European markets.
The refinancing underscores institutional recognition of structural tailwinds in budget accommodation. Proprium Capital Partners' Philipp Westermann noted that despite the sector's "highly defensive characteristics and outperformance in recent years," the hostel market remains fragmented, presenting consolidation opportunities. Ben Eppley, partner and head of real estate credit at Apollo, affirmed that "A&O has executed on its accelerated growth strategy ahead of schedule whilst remaining highly disciplined." Apollo's continued financing partnership signals confidence in the sector's resilience and A&O's ability to capture market share through disciplined capital deployment and operational excellence.
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