Briefing: Are alternatives now mainstream?
Osprey Equity Partners recently agreed to fund an £80m development of a GoNative aparthotel in East London. They are backed by LJ Partnership.
Alternative accommodation types like aparthotels and hostels are becoming increasingly attractive to investors. More in-depth data from historic transactions and long established properties in the sector, have given investors greater insight on which to base their decisions. This is slowly bringing more products into the mainstream, as our industry experts discuss in these videos:
A report by WATG released last year showed that one attractive element of aparthotels is the cost effectiveness to build. It states that on a site with an £17.5m acquisition cost, a 4 star hotel would take £28.2m to construct and a 4 star aparthotel only £27.2m. It also states that terminal value on the aparthotel would be £93.1m and only £82.3m on the hotel, where both have an exit yield of 5%.
Another difference between hotels and aparthotels highlighted by WATG is that, in an aparthotel, rooms division accounts for some 93% of revenues, whereas hotels take a large portion of revenue from F&B and other areas.
Finally, WATG’s report showed GOP margins of 63% and 49% for the respective aparthotel and hotel.
When completed the GoNative aparthotel will be a 21 storey property. GoNative will manage the property under a hotel management agreement.
If you’ve been sent to this page and you’re not yet on the circulation list to receive these regular briefings and you would like to sign up, you can do see here. It’s free.