Wellcome Trust has agreed a joint venture to back London budget hotel chain Tune.
Wellcome Trust has acquired a 50% stake in Raag Hotels, a company associated with the Jivraj family and a company owned by Naguib Kheraj. The hotels are run under the Tune brand and managed by Queensway Hotels.
Mountgrange Real Estate Opportunity Fund, which originally teamed up with the Jivraj family and Kheraj to form Raag Hotels, is realising its investment in full as part of the transaction.
In addition, the shareholders have committed additional equity to fund the expansion of the hotel chain in the capital, taking the portfolio from 616 rooms to 1,500.
Raag Hotels has also acquired a site in Canary Wharf, which has planning consent for a 130-bedroom hotel. The Tune Hotel Canary Wharf is expected to open in early 2015.
When Raag Hotels formed in 2010, Mountgrange, the Jivraj Family and Kheraj planned to invest more than £100m in 15 hotels to be developed in London by 2017. Tune Hotels is now operating in Westminster, Liverpool Street, Paddington and Kings Cross.
Bank finance for the development of the Raag Hotels business has been provided by HSBC and RBS.
Naushad Jivraj, chief executive of Queensway Hotels, said: “We are delighted to form this new joint venture with the Wellcome Trust, an institution which has a most distinguished track record and reputation as a long-term investor.
“Mountgrange have been an excellent partner to work with and we are pleased that the confidence they showed in backing the start-up of this business has produced a successful outcome for their investors.”
Peter Pereira Gray, managing director of the investment division of the Wellcome Trust, said: “The Tune Hotels concept is innovative and provides consumers with an offering which is high quality and very good value for money.
“The business produces an attractive cashflow profile with the potential for long-term capital appreciation. We see the opportunity to expand this business and add to its portfolio of well-located properties in London.”
Manish Chande, senior partner at Mountgrange, added: “We are delighted with the performance of this venture and our operating partner Queensway Hotels. Having supported the early stage development of this business, now is the right time for a new investor to be part of the next stage of growth.”
Annabel.Dixon@estatesgazette.com
