Patrizia has invested around £25m (€29m) in the Malmaison hotel in Edinburgh city centre on behalf of one of its UK institutional clients.

The 72-bed boutique hotel is in a prime location on St Andrew’s Square close to Edinburgh Castle, St James Quarter and the Royal Mile.

The fund manager said the hotel benefits from an “attractive inflation-linked long income profile”, with a 30-year lease with one of the UK’s leading boutique hotel groups. The asset has the third highest Average Daily Date (ADR) in Malmaison’s 17-property portfolio and is expected to reach 85-90% occupancy this year, Patrizia added.

The hotel was redeveloped and launched in 2020, showcasing high standards in design and architecture that is in keeping with the city’s UNESCO world heritage status.

Malmaison, Edinburgh city centre

Source: Patrizia

Malmaison, Edinburgh city centre

Patrizia said Edinburgh was performing strongly due to tight supply and growing tourism demand following the pandemic. It is the UK’s second-most visited city with 4.5m overnight visitors in 2022, of which approximately 50% were international tourists.

Phil Irons, head of transactions for UK and Ireland, at Patrizia, said: “We are pleased to have acquired this exceptional asset in an off-market deal to further our client’s strategy to diversify into alternative sectors like hospitality. Edinburgh’s world-renowned reputation for culture, sport and business make it one of Europe’s strongest hotel markets, which is being further driven by the post-pandemic recovery in international tourism.

“While the transactions market remains muted, the current conditions continue to present attractive opportunities for us to acquire re-priced core assets that benefit from strong fundamentals.”

Duncan White, director of fund management at Patrizia, said: “We are really pleased to have found another strong repriced core investment opportunity for one of our UK institutional clients. The Malmaison hotel is an evergreen property supported by strong occupational market fundamentals. We hope to acquire similar attractive repriced core opportunities throughout the remainder of 2024 and beyond”

Patrizia was advised by JLL, Burness Paull and Colliers.

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