Hostel chain A&O Hostels has completed a circa £761M refinancing provided by funds managed by Apollo Global Management secured against its portfolio of 44 hostels across 29 cities in 10 European countries.

The senior multiyear loan has replaced an existing facility with Apollo and will enable A&O to deliver on the £435M next phase of its growth strategy in its core markets, the company said.

StepStone Group and Proprium Capital Partners, part of Legal & General, sponsored a management-led acquisition of A&O at the end of 2023, enabling it to undertake an initial €500M platform expansion programme.

Founded in 2000 by Oliver Winter, A&O is one of the largest budget hostel chains in the world. The company achieved circa £215M in revenue last year as it received a record 2.8 million guests and 6.6 million overnight stays. Over the past 24 months, the company has acquired approximately 11,500 beds, some operational and some assets being developed or refurbished, bringing its total to around 30,000 beds.

Recent acquisitions have included assets in Manchester, London, Brussels and Antwerp, Belgium, and Berlin and Heidelberg, Germany, as well as the Schulz Hotel platform.

In January, A&O Hostels bought the freehold of two hotel assets on Portland and Dickinson streets in central Manchester from Ares Management funds and EQ Group. The four-storey, adjoining properties, totalling 140K SF, were previously operated under a franchise agreement with Accor, trading under its budget and midmarket hotel brands Ibis and Novotel.

A&O is undertaking an £8.2M refurbishment programme across both properties to deliver a scheme comprising 1,218 beds, with work expected to be concluded by the first quarter of 2027, with the property remaining fully operational throughout.

“Despite its highly defensive characteristics and outperformance in recent years, underpinned by the attractive income profile, the hostels sector remains fragmented,” Proprium Capital Partners partner Philipp Westermann said in a statement. “This facility provides us with the firepower to capitalise on this opportunity and rapidly scale the platform, through both asset and corporate acquisitions, alongside a long-term financing partner with a shared conviction in the sector’s fundamentals.”