In 2014, we were asked to advise a private client who owned a former public house trading as a Burger King on the A20. Our client had recently retired and ultimately wanted a secure income that in due course he could pass on to his children, and he was also at that time reluctant to sell for tax reasons. The Burger King was operating as a franchise and, as such, the covenant was not particularly strong. The lease was coming to an end and although the current tenants would have continued trading, it made sense to look at alternative options.
Knowing that Premier Inn had a requirement in the area and given the location was ideal for a hotel, we structured a deal whereby Premier Inn took a long lease (999 years with breaks every 25 years) over the land. The deal was structured so that Premier Inn paid an initial premium and then an annual rent higher than the rent being previously paid by the Burger King franchise. In return, Premier Inn effectively had control of the land to develop and trade a hotel from the site. Planning permission was granted and Premier Inn constructed a 91 bedroom hotel with parking and a bar/ restaurant facility. The outcome was that our client then had a long term income from one of the best covenants in the UK (5A1) plus a new hotel on the land he continued to own the freehold of. A valuable investment!
Towards the end of 2016, once the hotel was open and trading, our client contacted us again advising that his circumstances had changed and asked if we would sell the investment. We set about the marketing and ultimately concluded a sale at a gross initial yield of 3.64% to a private family investment fund. Contracts exchanged within 3 days of the buyers receiving a legal pack.
If you own a property or site where you believe there could be potential to unlock value, please contact us for advice on maximising value.
PROJECT ADDRESS: Premier Inn Hotel, Five Ways Junction, Sidcup Road, London SE9 3NS
CLIENT: Private Landlord