Newcastle hotel up for sale at £31.8m
Knight Frank has been appointed to sell the 274-bedroom Leonardo hotel, formerly a Jurys Inn, at St James’ Gate on behalf of a UK investment fund.
The hotel is let to Leonardo Hotel Management (UK) for the next 14.4 years and has a passing rent of £2,888,054 per year.
Formerly a Jurys Inn, the Leonardo Hotel was rebranded and refurbished in 2022 and is one of 52 Leonardo hotels across the UK and Ireland.
The Leonardo brand is part of the Fattal Hotel Group and has another Newcastle hotel, at the Quayside.
If sold for £31.8m, the purchaser can expect a running yield of around 8.5% this year, rising to 9.86% in 2028, and 11.05% in 2033.
Partner at Knight Frank, Charlie Fletcher, is expecting interest to be high: “This is a well-located, recently rebranded city centre hotel only a few minutes’ walk from Newcastle Central train station and it is operated by a well-known international brand. The investment is priced attractively and at the quoted price it is also substantially underpinned by its vacant possession value.”
Knight Frank said that Newcastle has been one of the UK’s best performing hotel markets post-pandemic, with 2022 Revenue Per Available Room (RevPAR) more than 15% up on 2019.
The city is also particularly attractive to customers in the current market, with the lowest average daily rate among the key regional cities, at £69.
Due to rising inflation, ADRs have increased significantly across the UK, however, Newcastle was theonly market out of all comparable cities to experience occupancy growth. In 2022 occupancy was 74.2% compared to 73.2% in 2019.
Dickon Wood, capital markets partner at Knight Frank in Newcastle, adds: “Newcastle has almost 8,500 hotel rooms and has only experienced modest room supply growth in the last five years, with a very limited supply growth forecast for the next five, so this asset’s place and potential in the market is very secure.”