The regeneration of London’s Paddington will take a further step forward with the development of a 620 room hotel and aparthotel complex. The tenants of the scheme will be Whitbread brand Premier Inn and Staycity and it is expected to open by 2021.
M&G has acquired the long leasehold interest of the development site and will finance the construction of the hotel complex to be carried out by development consortium, Concierge 3 Limited (a joint venture partnership between The Pickstock Group, Staycity and BSW Land & Property Ltd). The capital is provided by the £4.1 billion M&G Secured Property Income Fund, which invests in UK real estate assets let on long-term leases, usually with rents that increase in line with inflation.
Under the terms of the deal, Whitbread plc, the owner of Premier Inn (“Whitbread”) and Staycity will each take 30-year leases on five yearly inflation-linked rent reviews, operating independently with 60% and 40% of the rooms respectively. The ongoing transformation of the area and its excellent transport links continue to improve Paddington’s desirability as an office and leisure location, strengthening demand for accommodation from business and leisure visitors. The scheme also has provision for a 27,000 sq ft education facility, landscaping and open space.
Staycity, a leading aparthotel operator, will provide the aparthotel side of the development under its premium brand Wilde Aparthotels by Staycity, consisting of smart, design-led studios and one-bed spaces which will enable guests to relax, cook and work in inspiring interiors. Whitbread will provide a latest generation 373-bedroom Premier Inn hotel, which will be its first in Paddington.
Kevin Vickers, Investment Director, M&G Real Estate, says: “Business travellers continue to seek well-connected and affordable central London accommodation. The £2 billion invested in Paddington in recent years has predominantly been invested in office and residential developments, positioning this hotel and aparthotel transaction as an attractive investment opportunity.
“London is one of Europe’s best performing hotel markets and is expected to account for more than a third of the pipeline of new aparthotels in the UK and Ireland market by 2021. The increase of high-profile operators entering the market and the availability of operating data is enabling investors to become more comfortable with investing into the sector.”
Jonathan Langdon, Acquisition Manager (Central London) for Whitbread, says: “We’ve been exploring opportunities to invest in Paddington for some time now and are very excited at the prospect of gaining a presence for Premier Inn there. It’s a fantastic development in one of London’s most vibrant and well-connected areas and the hotel adds another quality zone-one location to our growing London portfolio. The new Premier Inn will make a positive contribution to the area by offering visitors greater choice, creating local jobs and spreading the positive knock-on benefits to local businesses that Premier Inn hotels bring.”
Tom Walsh, CEO and co-founder of Dublin-based Staycity, says: “We are delighted to be part of this exciting development opportunity. Paddington Station is London’s gateway to the West and is just 15 minutes from Heathrow Airport. As well as being a burgeoning business area, leisure visitors can enjoy two royal parks within walking distance, the picturesque Little Venice and great links to London’s Notting Hill and the West End.”
Ben Jones, manager of the M&G Secured Property Income Fund, adds: “This is a rare opportunity to acquire a large scale, high quality property in central London offering such long-term income. Our institutional investors continue to seek assets with long leases that generate income in order to meet regular pension fund payments, as well as the potential increase in commercial property values when investing over the long-term.”
This is the Fund’s fifth transaction with Whitbread as a tenant, following a £100 million funding deal to develop a 339-room hub by Premier Inn hotel on Tothill Street, Westminster, adding to the existing portfolio of Premier Inn hotels at Gatwick Airport North Terminal, Holborn and Wandsworth.