UBS Asset Management's (UBS-AM) real estate & private markets (REPM) business has completed the acquisition of the Travelodge hotel in Edinburgh, Scotland, for £9.4 mln (€10 mln), reflecting a net initial yield of circa 5.25%.
The property was bought from a private individual on behalf of the UBS Long Income UK property fund and will continue to be operated by Travelodge Hotels Limited on a long-term lease running to 2042, with a landlord option for a further five years.
'Travelodge is one of the largest brands within the UK budget hotel sector, and we look forward to a strong partnership with them as the hotel's continued operator and occupier,' said Jonathan Hollick, head of transactions for REPM’s Real Estate UK team. 'The stable long-term, indexed cashflow offers attractive income distribution for the fund's investors while also providing diversification benefits to the rest of their fixed income and property portfolios.'
Having been refurbished in 2013, the five-storey hotel in the Haymarket comprises 73 en-suite bedrooms, along with a restaurant and common space lobby on the ground floor.
'Moreover, the performance of Edinburgh’s hotel market is second only to London in terms of occupancy and RevPAR growth, and with the Haymarket regeneration scheme set to add further value to a city already receiving above-average levels of hotel occupancy, we expect this acquisition to provide strong returns for our investors,' Hollick added.
The property is let on a long-lease subject to five-yearly uncapped RPI upwards-only rent reviews. UBS also noted that given the asset's location in Edinburgh's West End, its investment value is heavily underpinned by a robust alternative use value.
UBS said that the deal further diversifies the tenant mix within the fund, supports its distribution yield and enhances the portfolio's weighted average unexpired lease term.
JLL acted for UBS-AM and both Cushman & Wakefield and Greenberry Advisors acted for the vendor.