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 Premier Inn and Staycity Group 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 (a joint venture partnership between The Pickstock Group, Staycity and BSW Land & Property).
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, the owner of Premier and Staycity will each take 30-year leases on five yearly inflation-linked rent reviews, operating independently with 60 and 40 per cent 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.
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, said: “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.”
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.