Cardiff-based developer Barola has concluded agreements with Aviva Investors’ Lime Property Fund to forward fund the redevelopment of the former Custom House building in Central Cardiff, for £34m.
Pre-let to Premier Inn, the site is widely recognised as being the final piece of the Central Cardiff regeneration jigsaw that has seen the development of Central Square, the regeneration of Mill Lane and the Brewery Quarter, and the addition of St David’s 2 and will shortly see the redevelopment of Cardiff Central Station, which is 100 metres from the site.
Planning consent for the new hotel was obtained in November 2017 and demolition of the former York Hotel and elements of Custom House is already underway. Construction of a striking 125,000 sq ft GIA, 20-storey hotel and bar/restaurant retaining the Listed Custom House facades will start after Easter, with opening forecast for late 2019.
The Premier Inn hotel will provide 248 bedrooms over 17 floors, incorporating a Whitbread branded Bar & Block restaurant at ground and mezzanine levels fronting Custom House Street and St Mary Street. Premier Inn is taking a 30-year lease from completion of the building at a rent of £1,475,600 per annum. There is a tenant break in year 20 and Whitbread Group PLC is Guarantor.
Lime Property Fund is a secure income long lease property fund managed by Aviva Investors with a net asset value of over £2bn. The fund targets property investments let to strong tenants on leases with inflation-linked or fixed-rental uplifts and lease terms of 15 years-plus.
Jamie Devonald of Barola said: “We are delighted to have concluded a forward funding agreement with Aviva Investors to develop this important site and look forward to delivering a landmark building for both the Lime Property Fund and Premier Inn. In recent years our development activities have taken us away from Wales so it will be especially gratifying to undertake a project in Cardiff, our home city.”
Kris McPhail, Co-Fund Manager of the Lime Property Fund at Aviva Investors, added: “We are very pleased to be working with Barola on this opportunity. This transaction provides our institutional clients with inflation-linked cash flow from a strong tenant and a property that is well located. These are exactly the type of investments we are actively targeting for the Lime Property Fund.”
Richard Talbot-Williams of BNP Paribas Real Estate acted for Barola jointly with Cushman & Wakefield, whilst JLL represented Aviva Investors.
Richard Talbot-Williams commented: “With Premier Inn as its pre-let partner, Barola has skilfully put together a fantastic scheme on this prime derelict city centre site using its unrivalled local knowledge. It has been an absolute pleasure to be their lead funding agent. Following strong competition for the funding from a good number of the major UK property funding institutions, showcasing continuing and growing demand for best in class long let index linked assets, Aviva Investors was selected to forward fund the scheme.
“Barola and Aviva Investors have worked collaboratively to achieve a result that works extremely well for both parties. Cardiff desperately needs this centrally-located, premium budget hotel and I have no doubt that following opening in late 2019 the hotel and restaurant will mature very rapidly and exceed its pre-development forecast trading projections.”