Forward Funding Deal
A specialist property investor has agreed to forward fund a 161-room hotel in Newcastle, which is due for completion in 2020, and has acquired another venue on the banks of the River Tyne in the city.
Orchard Street Investment Management has completed the £38m transaction for the Travelodge Quayside hotel and the forward funding of a Meliá hotel development on behalf of St James’s Place UK. The combined purchase price reflects a net initial yield of 4.5 per cent.
Due for completion in summer 2020, the Meliá development is a purpose-built hotel with 161 rooms on seven floors.
The venue, to be operated under the company’s INNSIDE brand, will also contain a restaurant, bar, fitness suite and conference facilities. The asset has been pre-let for a term of 25 years and will be subject to five-yearly inflation-linked rent reviews.
The adjacent 120-room Travelodge Quayside hotel opened in November 2017 and also includes a restaurant and bar. Travelodge pre-let the entire building for a term of 25 years, with five-yearly inflation-linked rent reviews.
Orchard Street was advised on the transaction by Whitmarsh Holt Young, while seller Union Property Development was advised by Lambert Smith Hampton.
Harry Buxton, acquisitions manager at Orchard Street, said: “Newcastle’s appeal as a business and tourist destination continues to strengthen.
“These acquisitions provide a strong foothold in Newcastle’s hotel market and, with the hotels benefiting from high-quality covenants and long lease terms with minimum rental uplifts, the assets will provide stable income returns for our client.”
Managing director of Union Property Development Raj Sehgal added: “We are thrilled to have completed these transactions with Orchard Street and are proud to be able to bring high-quality developments such as the new Travelodge and Meliá INNSIDE hotels to Newcastle; which in turn will create jobs and bring this prime area of the city to life.”