Orchard Street Investment Management has purchased two hotel investments in Newcastle city centre from Union Property Development for £38m.
The deal, made on behalf of St James’s Place, comprises the acquisition of the Travelodge Quayside hotel and the forward funding of a Meliá hotel development.
The combined purchase price reflects a net initial yield of 4.5%.
The Meliá development is due for completion in the summer of 2020 and will comprise a modern purpose-built hotel with 161 rooms across seven floors. It will also contain a restaurant, bar, fitness suite and conference facilities.
The asset, to be operated by Meliá’s contemporary Innside brand, 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 comprises five floors, featuring a restaurant and bar.
Travelodge pre-let the entire building for a term of 25 years, with five-yearly inflation-linked rent reviews. There are 43 underground car parking spaces that will be shared with the Meliá hotel.
The two freehold properties occupy a location fronting Newcastle’s Quayside, close to the Tyne Bridge and with views across the River Tyne towards Gateshead.
Harry Buxton, Orchard Street’s acquisitions manager, said: “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 was advised on the transaction by Whitmarsh Holt Young. The seller was advised by Lambert Smith Hampton.
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