The London Pension Fund Authority has forward-funded a mixed-use Travelodge development at a former BHS store in St Albans, Hertfordshire.
Knight Frank Investment Management, which acts on behalf of the pension fund, has paid £24.4m to developer Reef Estates for the completed asset, reflecting a blended net initial yield of 4.38%.
Practical completion of the project, which comprises a 130-bedroom hotel and restaurant, is expected in Q3 2020.
The scheme is let to Travelodge on a new 35-year lease, while the majority of the ground-floor retail is let for 20 years to Youngs & Co Brewery for a pub and restaurant.
Richard Lines, partner and head of Gerald Eve’s alternatives capital markets team, said: “St Albans is a market that has an under-supply of hotel rooms, especially at the price point Travelodge offers, and this scheme will go some way to meeting this demand.
“The development is a key example of alternative uses being found for struggling high street properties.
“The vacant BHS store will make way for the new development, which will inject life into the immediate area surrounding St Peters Street.”
John Styles, partner and fund manager for LPFA, said: “The investment will provide very attractive long secure income streams to balance more active management risks in other parts of the LPFA portfolio and completes the investment of a £300m allocation made in June 2016.”
Gerald Eve represented KFIM, while JLL acted on behalf of Reef Estates.
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