Exit Announcement - Travelodge in Torquay

News: Investment News | 12 April 2018

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Connection Capital delivers healthy returns with £8.5m sale of Torquay Travelodge to BP pension fund

  • Connection Capital’s private investor clients see 17.3% IRR or 1.5x money in 2 ½ years
  • Deal demonstrates institutional investor demand for long term income producing assets

Connection Capital, the specialist private client investment business, has delivered healthy returns for its private investor clients with the £8.5 million sale of a Travelodge in Torquay to Ropemaker Properties Ltd, the property holding company of the BP pension fund.

Connection Capital bought the hotel for £6.2 million in September 2015 through its property partner Riverside Capital, with private investors able to participate in £25,000 tranches.

The sale will generate a return of 17.3% IRR, or 1.5x investment in just 2 ½ years. The sale price reflects a 5% initial yield.

The purpose-built 31,312 square foot, 90-bed freehold hotel has a bar and café as well as 44 parking spaces. It is centrally located, close to one of the town’s train stations. Built in 2008, it was extensively refurbished in 2014 prior to Connection Capital’s investment.

The property is let to Travelodge Hotels, one of the UK’s leading hotel groups, on a long lease (until 2048) and benefits from uncapped rent review provisions, based on RPI. Travelodge now has 558 hotels in its portfolio and recently announced a 6.6% increase in revenue to £637.1m in 2017.

Claire Madden, Managing Partner at Connection Capital comments, “This deal has exceeded our best-case expectations, so we are delighted to have delivered impressive returns once again for our private investor clients.”

“When we invested, this was an opportunity with robust underlying fundamentals and the potential to capitalise on strong market demand and improved operational performance in terms of the site itself the Travelodge brand.”

“It was newly refurbished, occupying a prime central location in one of the UK’s premier holiday destinations, let to a top hotel chain – not the kind of deal that private investors get access to every day.”

“Since we acquired this hotel, the tenant covenant has improved significantly, so much so that the asset is now institutional-grade.”

“This deal is a prime example that the demand is out there from institutional investors such as pension funds for assets which deliver long-term income to ensure they perform well now and in decades to come.”

Ashley Wilcox at Riverside Capital comments, “This deal proves once again that commercial property can be a very important and rewarding asset class in private investor portfolios.”

“The fact that this property was sold to a major institutional investor demonstrates the market’s desire for long-dated income, something we are seeing more and more of. It also highlights the calibre of the kinds of investments we are able to offer Connection Capital’s clients.”

Other commercial property investments made by Connection Capital, include property tenanted by DPD, Aldi, Premier Inn and Travis Perkins.