UK Commercial Property Trust, advised by Standard Life Investments, is forward funding the development of a four-star Maldron Hotel in Newcastle city centre in the UK for £32 mln (€36 mln).
The development, which includes an ancillary retail unit, has been pre-let on a long lease to the Dalata Hotel Group and is expected to deliver a yield on cost of 5.4%.
The acquisition is UK Commercial Property Trust's first in the hotel sector. The deal is structured through an initial upfront payment and interim funding at 5% interest during the construction period, followed by a balancing payment on completion.
Dalata, Ireland’s largest hotel operator, has agreed a 35-year lease with five-yearly rent reviews and no break options.
The hotel, Dalata’s ninth in the UK, will have 265 rooms and include a conference centre, business meeting rooms and restaurant space. It is due to complete in the first quarter of 2019, generating an initial passing rent of £1.59 mln per annum. The total scheme, including the retail unit, is expected to generate an initial passing rent of £1.74 mln.
Will Fulton, fund manager at Standard Life Investments, said: 'We have been assessing opportunities in the alternative sectors as a means to enhance longer-term income and dividend cover.'
