Dalata completes the $28M sale and leaseback of its Clayton Hotel

Clayton Hotel Cardiff
The Clayton Hotel Cardiff, Wales, UK

Dublin-based Dalata Hotel Group has finalized a $28.2-million sale-leaseback deal for its Clayton Hotel in Cardiff city center. London-based M&G Real Estate is the new owner of the 216-room hotel while Dalata is reportedly holding onto the hotel's fixtures and fittings valued at about $2.7 million, Insider Media Limited reported.

Dermot Crowley, DCE of business development and finance at Dalata, told Insider Media Limited, "The sale and leaseback of Clayton Cardiff is consistent with our stated strategy of growing our UK portfolio primarily through operating leases. The hotel continues to perform strongly, and this reaffirms our commitment to developing our hotel business within the UK."

The Clayton Hotel reportedly generated close to $3 million in EBTDAR last year. Davy analysts projected during the initial transaction announcement early this month that the acquisition, sale and leaseback will result in an initial rental saving of approximately $454,000 a year. The savings will be payable in cash, and the proceeds of the transaction will be used to decrease net debt arising from recent asset purchases. 

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Dalata will lease the hotel for a 35-year term while paying about $1.5 million in rent per year. The Irish hotel group will be subject to rent reviews every five years. Matthew Stone, head of long income at M&G Real Estate, said in a statement, "We are delighted to have agreed this bespoke transaction with Dalata, which reflects our strategy of working with occupiers to set the lowest possible rent in return for a long lease commitment. Dalata will therefore benefit from a long term sustainable occupancy cost and M&G's investors will benefit from a long term predicable and stable cash flow."

Dalata Hotel Group acquired the Clayton Cardiff in late October 2016 for about $31 million in an off-market deal from an undisclosed private investor. During the deal, international real estate adviser Savills represented Dalata while EJ Hales, a property advisory in Cardiff, represented the vendor.