Development Securities has bought the Royal York Buildings in Brighton city centre out of administration for £4.5m.
The vacant 45,600 sq ft Grade II-listed property once housed the 51-bed Royal York Hotel. It also features 3,400 sq ft of retail and amenity space.
Brighton and Hove city council have approved plans for a change of use for the building to create a 180-bed youth hostel.
At the same time, a 100-year lease has been signed with the YHA at a starting rent of £200,000 per year, subject to five-yearly RPI indexation with the first break in 30 years.
DevSec is now weighing up its options for the remaining space and plans to refurbish and let the serviced apartments.
After the expiry of a short rent-free period, the hostel and serviced apartments will produce an expected income return of 7.32%, the company said.
Matthew Weiner, director, Development Securities, said: “The Royal York Buildings are a strong addition to our investment portfolio with the YHA already having been secured as an anchor tenant. The building is well-located in the centre of Brighton and in addition to the new youth hostel, offers further asset management opportunities to create an attractive and vibrant leisure destination in this prominent location.”
jack.sidders@estatesgazette.com
