Leonardo Hotel Newcastle brought to market for £31.8m

The Leonardo Hotel at St James Gate in Newcastle has been brought to market on behalf of a UK investment fund, with offers of over £31.8m being sought. The 274-bedroom, upper-midscale hotel is let to Leonardo Hotel Management (UK) Limited for the next 14.4 years and has a passing rent of £2,888,054 per annum. Formerly a Jury’s Inn, the Leonardo Hotel was rebranded and refurbished in 2022 and is one of 52 Leonardo Hotels across the UK and Ireland – owned by the Fattal Hotel Group. If sold for £31.8m, the purchaser can expect a running yield of around 8.5% this year, rising to 9.86% in 2028, and 11.05% in 2033. Partner at Knight Frank, Charlie Fletcher, who is handling the sale, is expecting interest to be high. Fletcher said: “This is a well-located, recently rebranded city centre hotel only a few minutes’ walk from Newcastle Central train station and it is operated by a well-known international brand. The investment is priced attractively and at the quoted price it is also substantially underpinned by its vacant possession value.” Newcastle has been one of the UK’s best performing hotel markets post-pandemic, with 2022 Revenue Per Available Room (RevPAR) over 15% higher than in 2019. With an Average Daily Rate (ADR) of £69, Newcastle has the lowest ADR of all the regional markets, presenting an attractive proposition for budget-friendly overnight stays. Due to rising inflation, ADRs have increased significantly across the UK, however, Newcastle was the only market out of all comparable cities to experience occupancy growth. In 2022 occupancy was 74.2% compared to 73.2% in 2019. Dickon Wood, capital markets partner at Knight Frank in Newcastle, said: “Newcastle has almost 8,500 hotel rooms and has only experienced modest room supply growth in the last five years, with a very limited supply growth forecast for the next five, so this asset’s place and potential in the market is very secure.”