4.50% yield represents a new sector benchmark for the region
National commercial property consultancy Lambert Smith Hampton (LSH) has advised on the simultaneous sale and funding of two high profile hotels on Newcastle Quayside in a deal totalling £38m.
Acting for Union Property Developments, LSH advised on the sale of the Travelodge and the forward funding of a new Innside Hotel to Orchard Street Investment Management, who acquired on behalf of their clients St James Place UK plc.
Operated by Spanish hotel group Meliá Hotels International, the four-star Innside Hotel will be located next to the Travelodge, replacing the east wing of the former BT building, Bridge Court.
The building on the banks of the River Tyne has stood empty since 2011 when LSH sold Bridge Court as a vacant office on behalf of the telecoms company to Union Property Developments. Helen Marks, Director – Planning and Development Consultancy at Lambert Smith Hampton in Newcastle subsequently achieved planning consent for hotel use.
The Melia development is due for completion in the summer of 2020 and will comprise a modern purpose-built hotel with 161 rooms across seven floors. The hotel will also contain a restaurant, bar, fitness suite and conference facilities. The asset, to be operated by Melia’s contemporary ‘Innside’ brand, has been pre-let for a term of 25 years and will be subject to 5-yearly inflation-linked rent reviews.
The adjacent Travelodge Quayside hotel opened in November 2017 and comprises a 120-room hotel across five floors, a restaurant and bar. Travelodge pre-let the entire building for a term of 25 years, with 5-yearly inflation-linked rent reviews. There are 43 underground car spaces shared with the Melia hotel.
Luke Symonds, Director – Capital Markets at Lambert Smith Hampton said: “LSH is delighted to have provided multi-disciplinary advice on this landmark project, from the original sale to planning consent and latterly securing our client’s exit as an institutional product.
“This deal and the achievement of a 4.50% yield represents a new sector benchmark for the region and clearly demonstrates that Newcastle is on the map for institutional investors. Union assembled a high quality advisory team to deliver this scheme and LSH are pleased help write another chapter in the history of Newcastle’s famous quayside.”
Raj Seghal, Director – Union said: “It was a pleasure to work with the LSH team throughout the various stages of this project, which breathes new life into a substantial vacant building on the historic quayside. We now look forward to bringing the Innside hotel forward to complete this market leading scheme. Union is focused on delivering best in class developments and we are proud to bring this transformational project to our home city.”
Harry Buxton, Acquisitions Manager at Orchard Street, commented: “Newcastle’s appeal as a business and tourist destination continues to strengthen. Its hosting of the Great Exhibition of the North this past summer, the largest event in England and one which attracted over four million visitors, reinforces its position as a leading UK city. 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.”
Orchard Street were advised by Whitmarsh Holt Young.