Lothian Pension Fund has acquired the Hanover Buildings in Edinburgh from Oval Real Estate for £23.4m in a deal reflecting a net initial yield of 5.66%.
The hotel-anchored mixed-use asset at 66-84 Rose Street, comprises a 145-bedroom hotel let to Hub by Premier Inn and five retail and leisure units, let to Lucy & Yak, William Hill, Cotswold Outdoor, Assaggini and Veeno.
The hotel is secured on a long index-linked lease and accounts for approximately 70% of the scheme’s overall income.
Nicola Barrett, portfolio manager at Lothian Pension Fund, said: “Hanover Buildings is a high quality, income producing asset in a prime city centre location. The strength of the hotel covenant, combined with diversified retail and leisure income, aligns well with our strategy of securing resilient, long-term real estate investments that deliver stable returns for Lothian Pension Fund.”
Colin Finlayson, director at Lismore Real Estate Advisors, which advised Lothian Pension Fund on the deal, added: “Investor demand for hotels across the UK remains particularly strong and this is increasingly evident in Edinburgh, where global tourism and business travel continue to underpin robust occupancy levels. With supply relatively constrained, well-located, income-secure assets such as Hanover Buildings are attracting significant interest and offering compelling long-term returns for our client.”
Elliot Cassels, director at Westwood Real Estate, which advised Oval Real Estate, said: “The property generated interest from UK funds and overseas buyers who were attracted to the long index-linked hotel lease, and the vibrancy of the ground floor retail and leisure mix, where tenant and investor demand has rebounded in recent years.”
Lismore and CMS advised Lothian Pension Fund and Westwood Real Estate and DLA acted for the vendor.
