Property overview

AVIVA Staff Pension Fund, represented by Atlas Real Estate, has exchanged contracts on the forward funding of a £5.83m hotel development on Tipton Road, Dudley.

The development is located adjacent to the Dudley Archives and opposite the entrance to Castlegate Business and Leisure Park, half a mile from Dudley town centre.  The development will comprise a 78 bed Travelodge Hotel with a 48 cover restaurant on the ground floor and a 72 space car park.  The property is being developed by Hinton Properties and construction has commenced on site with scheduled for completion in July 2017.

On completion the property will be let to Dudley Metropolitan Borough Council for a term of 25 years (with an option to renew for a further 25 years on expiry) at a commencing rent of £280,000 per annum.  The lease is subject to five yearly upward only reviews to RPI collared at 1% and capped at 4% per annum compounded.

Dudley Metropolitan Borough Council will simultaneously sublet the property to Travelodge Hotels Ltd on a coterminous lease at a rent of £330,000 per annum wth the same rent review structure.

The purchase price represents a net initial yield of 4.50%.

Hinton Properties was unrepresented.

Ben Blackwall, Director at Atlas Real Estate comments ‘The structure of the deal wth Dudley MBC committing to a ‘shielded lease’ gave Aviva access to an annuity style income stream.  Also the Council not only benefitted from a capital receipt on the sale of the land but will retain a profit rent throughout the term of the lease.’