LXi REIT Buys Long-Leased Hotels in Edinburgh and Plymouth

Date: October 2018

Location: Edinburgh Park, Scotland and Plymouth, Devon, UK

Names: Travelodge Hotel, Edinburgh – opening 2019 and Jurys Inn Plymouth – opened in 2007

No. of Keys: 70 and 247

Seller:

Buyer: In Edinburgh, LXi has forward funded a 70 room Travelodge at Edinburgh Park. The GBP6.6m investment will initially yield 5.4% on a 25 year lease.

LXi REIT’s Investment Advisor is LXi REIT Advisors Limited, which is owned by the principals, shareholders and directors of Osprey Equity Partners Limited.

Osprey was formed in 2011 and is 50 per cent. owned by LJ Partnership. LJ Partnership was established in 2009 and has grown to become a substantial, international multi-family office and asset manager, managing US$14 billion of assets, including US$6.5 billion of real estate assets, for families, private individuals and institutions and headed up by Partners John White and Simon Lee.

After closing its capital raise earlier this month, London-based LXi REIT has acquired five properties from separate vendors/developers for approximately £109 million (excluding costs), including the two hotels.

The company exchanged contracts to provide forward funding for the pre-lease development of a 70-room Travelodge Hotel at Edinburgh Park, Edinburgh. The development represents a total investment by the REIT of £6.6 million, reflecting a 5.4-percent net initial yield (net of acquisition costs to the company).

The property has been fully pre-let to Travelodge Hotels Ltd., the principal trading company of the Travelodge hotel group, on an unbroken 25-year lease from completion of the building, with five yearly rent reviews index-linked to the Consumer Price Index (capped at 4 percent per year and collared at 1 percent per year compound).

Travelodge operates more than 550 hotels with more than 41,000 rooms in the UK, Spain and Ireland.

The property is in the South Gyle business district, two miles southeast of Edinburgh International Airport and five miles west of Edinburgh city centre. The immediate area is one of the UK’s top business locations housing a wide range of corporations, including Aegon, BT, Diageo, JP Morgan, Scottish & Newcastle and Tesco Bank.

Planning consent has been granted, the agreement for lease has exchanged and the company is forward funding the project on a fixed-price basis. The company will receive an income from the developer during the construction period, and is not developing the site or assuming development risk. The building is due to be completed in Q3 2019.

Jurys Inn, Plymouth – The company has completed the acquisition of a 247-room Jurys Inn in Plymouth for £30 million, reflecting a 5.7-percent net initial yield (net of acquisition costs to the company).

The property is fully leased to Jurys Hotel Management (UK) Ltd., the principal trading company of the Jurys Inn group, with an unbroken 24-year unexpired lease term, with five yearly rent reviews index-linked to the uncapped Retail Price Index.

The hotel, which was purpose-built in 2007 and fully refurbished in 2016, includes a bar, restaurant and 11 conference and meeting rooms. It is located on Exeter Street, near Plymouth’s Historic Quarter and other tourist attractions such as the National Marine Aquarium and the Royal William Yard, and a short walk to the city centre and train station.

The hotel is one of the largest in Devon and draws significant business from leisure tourism, businesses linked to the maritime docks and a strong relationship with the local university.

The Jurys Inn portfolio includes 36 hotels with a total of 8,013 rooms in strategic transportation hubs across the UK and Ireland. The group was acquired in December for £800 million by Fattal Group, an Israeli hotel group operating 160 hotels in 17 countries.

The other acquisitions were the forward funding of a Lidl store and a B&M store in Cowdenbeath, East Fife, a Range discount store in Carlisle and a BCA logistics facility in Corby, Northants.

THPT Comment: Good safe yields of around 6%. LXi are no strangers to hotels with five Travelodges, 3 Premier Inns and the Cambridge Belfry already under their belt.

First Seen: Hotel Management