UBS Asset Management's (UBS-AM) Real Estate & Private Markets (REPM) business has completed the acquisition of the Travelodge hotel in Edinburgh, Scotland, for €10.3m (£9.4m), 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 (UBS-LIF Property, the 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.
Having been refurbished in 2013, the five-storey hotel comprises 73 en-suite bedrooms, along with a restaurant and common space lobby on the ground floor. Strategically located in Haymarket, Edinburgh’s prosperous West End, and with easy access to a range of transportation hubs, the hotel benefits from its proximity to the city’s multitude of leisure and culture offerings, along with tourist attractions, such as Edinburgh Castle and Royal Mile, as well as the Edinburgh Fringe arts festival, all of which help attract 3.7 million staying visitors to the city each year. Moreover, the Haymarket regeneration scheme, one of Edinburgh’s biggest commercial development projects, will, on completion, further enhance the area and increase visitor footfall through the provision of 340,000ft² of office space, 54,000ft² of retail and leisure units, and a car park.
Jonathan Hollick, Head of Transactions for REPM’s Real Estate UK team, commented: “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. 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. 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.”
