Acquired at a cyclical low on a 9.2% yield; value grown from £88k to £141k per key over the hold.
Realised
Key figures
£18.6m
Acquired
211
Keys
9.2%
Entry yield
£29.8m
Exit
19%
IRR
£88k → £141k
Value per key
The Opportunity
Why we acted
Located in central Croydon.
Subject to a 13-year unexpired lease with open market rent reviews.
Bought at an attractive initial yield, at a low cyclical point post GFC and was leased to a weak tenant on FRI lease.
Croydon was one of the fastest growing local economies in the UK.
An important hop-on and hop-off location for leisure visitors to London, given its proximity to both central London and fast connectivity to Gatwick airport.
Only credible 4* property in the centre of the town.
Branded a Clarion, part of Choice Hotel Group.
Investment Strategy
What we did
Vacant Possession of the property was more valuable than its encumbered Investment, therefore if the tenant collapsed it would release capital growth.
The initial yield was high relative to other London leased assets, with the potential to grow higher and to generate more immediate growth by converting from the Choice brand to a more established brand with a stronger distribution system.
Major interest from global brands/operators.
Significant ADR discount to the central London comp. set.
Rarity of leased hotels would underpin value and open up interest from institutions.
Potential to redevelop part of the site for residential and / or increase room count.
Opportunity to reposition the hotel through refurbishment of rooms and public areas.
Staple debt secured at attractive coupon, capturing significant positive cashflow for equity.
Sold in 5 years.
Hold
Start to finish
December 2013AcquireCyclical low point, strong initial yield, limited downside risk
2014–17Create valueActive asset management and site optimisation; occupancy up from 80% to 85%, ADR from £64 to £68
May 2018ExitSold at £29.8m; value per key up from £88k to £141k over the hold
Contact
Discuss a project with us
Whether you hold an underperforming asset, are weighing an acquisition, or need an owner-side view on strategy and capital, we would be glad to talk it through.
