M&G has acquired the long leasehold interest of the site, with construction to be carried out by development consortium Concierge 3 Limited – a joint venture partnership between the Pickstock Group, Staycity and BSW Land & Property Ltd.
The funding will be provided by the £4.1bn M&G Secured Property Income Fund.
The tenants of the scheme, which is expected to open by 2021, will be Premier Inn and Staycity Group.
Under the terms of the transaction, Whitbread PLC – the owner of Premier Inn – and Staycity will each take 30-year leases on five-yearly, inflation-linked rent reviews, operating independently with 60% and 40% of the rooms respectively.
Staycity will provide the aparthotel side of the development under its premium brand Wilde Aparthotels by Staycity, consisting of smart, design-led studios and one-bed spaces, while Whitbread will provide a latest-generation, 373-bedroom Premier Inn Hotel.
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Kevin Vickers, investment director at M&G Real Estate, said that business travellers continued to seek out well-connected and affordable central London accommodation.
“The £2bn invested in Paddington in recent years has predominantly been invested in office and residential developments, positioning this hotel and aparthotel transaction as an attractive investment opportunity.”
Tom Walsh, CEO and co-founder at Staycity, said that it was delighted to be part of this exciting development opportunity.
“Paddington station is London’s gateway to the West and is just 15 minutes from Heathrow airport.
“As well as being a burgeoning business area, leisure visitors can enjoy two royal parks within walking distance, the picturesque Little Venice and great links to London’s Notting Hill and the West End.”
Ben Jones, manager of the M&G Secured Property Income Fund, said that this was a rare opportunity to acquire a large-scale, high-quality property in central London offering such long-term income.
“Our institutional investors continue to seek assets with long leases that generate income in order to meet regular pension fund payments, as well as the potential increase in commercial property values when investing over the long term.”