The company – which is advised by Standard Life Investments and owns a diverse portfolio of UK commercial property – will forward fund the development of a 265-bed, four-star Maldron Hotel (pictured above) in Newcastle city centre for £32m, net of finance.

The development – which includes an ancillary retail unit – has been pre-let on a long lease to the Dalata Hotel Group and is expected to deliver a yield on cost of 5.4%.

The deal has been structured through an initial upfront payment and interim funding, which attracts finance interest at 5% during the construction period, followed by a balancing payment on completion.

Dalata has agreed a 35-year lease with five-yearly, annually compounded, RPI-linked, upward-only rent reviews with a cap and collar of 0.5-3.5% and no break options.

The announcement comes as UKCPT revealed it had disposed of a 25,802 sq ft office in Aberdeen for £6.5m.

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“These transactions demonstrate our continued efforts to increase the portfolio’s exposure to high-quality assets with the potential for income and capital growth,” said Will Fulton, fund manager at Standard Life Investments.

“As one strand of this strategy, we have been assessing opportunities in the alternative sectors as a means to enhance longer-term income and dividend cover.”

The hotel – which is due to be completed in Q1 2019 – is Dalata’s ninth in the UK and will operate under its Maldron brand.

It will feature a conference centre, business meeting rooms and restaurant space, and is located opposite to Newcastle’s popular Eldon Square shopping centre.

“Dalata and its flagship Maldron brand are an exciting, well-managed, high-quality, competitive hotelier with good board level experience of operating in the UK hotel market,” added Will.

“Its business plan is strong, and I believe this hotel will compete well in the Newcastle market – home to leading universities and a thriving business community – while providing a high-quality, long and increasing income stream at an attractive yield on cost.”