London's Paddington neighborhood prepares for dual-brand hotel

Staycity will operate the aparthotel side of the development under its premium brand Wilde Aparthotels by Staycity. Whitbread will oversee the 373-room Premier Inn hotel, its first in Paddington. Photo credit: M&G Secured Property Income Fund

London’s Paddington neighborhood is getting a new 620-room hotel and hybrid "aparthotel" complex. The dual-brand Premier Inn and Staycity property is expected to open by 2021.
 
UK-based investment manager M&G has acquired the long-leasehold interest of the development site and will finance the development of the hotel complex. The construction will be carried out by development consortium Concierge 3 Limited (a joint venture partnership of The Pickstock Group, Staycity and BSW Land & Property Ltd.). The capital is provided by the £4.1-billion M&G Secured Property Income Fund, which invests in UK real-estate assets rented on long-term leases, usually with rents that increase in line with inflation.

Under the terms of the deal, Whitbread, the owner of Premier Inn, and Staycity will each take 30-year leases on five yearly inflation-linked rent reviews, operating independently with 60 percent and 40 percent of the rooms, respectively. 

The ongoing transformation of the area and its transport links have boosted Paddington’s desirability as an office and leisure location, strengthening demand for accommodation from business and leisure visitors. The mixed-use development plan also has provision for a 27,000-square-foot education facility, landscaping and open space.
 
Staycity will operate the aparthotel side of the development under its premium brand Wilde Aparthotels by Staycity. Whitbread will oversee the 373-room Premier Inn hotel, its first in Paddington.
 
“Business travelers continue to seek well-connected and affordable central London accommodation,” said Kevin Vickers, investment director at M&G Real Estate. “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,” Vickers continued, noting occupancy in the city averaged around 84 percent in 2017, according to PwC. “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.”
 
“We’ve been exploring opportunities to invest in Paddington for some time now and are very excited at the prospect of gaining a presence for Premier Inn there,” said Jonathan Langdon, acquisition manager (Central London) for Whitbread. “It’s a fantastic development in one of London’s most vibrant and well-connected areas and the hotel adds another quality zone-one location to our growing London portfolio.”
 
“This is a rare opportunity to acquire a large scale, high-quality property in central London offering such long-term income,” said Ben Jones, manager of the M&G Secured Property Income Fund. “Our institutional investors continue to seek assets with long leases that generate income in order to meet regular pension fund payments, as well as the potential increase in commercial property values when investing over the long-term.”
 
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.

Virtual Roundtable

Post COVID-19: The New Guest Experience

Join Hotel Management’s Elaine Simon for our latest roundtable—Post COVID-19: The New Guest Experience. The experts on the panel will share how to inspire guest confidence that hotels are safe and clean and how to win back guest business.

Suggested Articles

Demand came in 67,000 rooms lower during the week ended July 4 than the previous week, according to Jan Freitag, STR’s SVP of lodging insights.

The In-Seat Contactless Platform is meant to give guests touch-free control over food and beverage at hotel restaurants.

As the economy slowly begins to right itself, hotels can look toward an unexpected way to save on operating costs: their trash.