Alternative Income REIT has sold the Mercure City Hotel in Glasgow for £7.5 million.
Located on Ingram Street, the 91-room hotel was sold to the current tenant S Hotels & Resorts, a Thailand-based hospitality company with a portfolio of 38 hotels across the UK, Mauritius, Maldives, Fiji and Thailand
The property represented 6.5 per cent of Alternative Income’s portfolio at June 30. The sale price represents a 7.9 per cent premium – around £550,000 - on the book value at June 3, and reflects a net exit yield of 8.9 per cent.
Based on the June 30 valuations, the transaction reduces the real estate investment trust’s loan-to-value from 41.6 per cent to 36.7 per cent, whilst the interest cover ratio is 556.3 per cent on its debt facility, which is fixed at 3.19 per cent and matures in October 2025.
Alternative Income says it intends to spend the proceeds from the sale on additional investment assets “as soon as practical”.
Why it matters
The fact the hotel sold at a 7.9 per cent premium to its book value from just a few weeks ago further cements the attractiveness of hotel assets, especially in city centre locations.
It’s also important to note the hotel constituted a significant 6.5 per cent of Alternative Income’s portfolio, and therefore the sale represents a reshuffling of the REIT’s assets. Whether Alternative Income has definite plans to pursue further investment in the hotel sector is yet to be seen, however we think that’s most likely the case, given the value realised from this sale.
What they said
Simon Bennett, non-executive Chair of Alternative Income REIT said: “We are pleased to sell the hotel in central Glasgow at an attractive 7.9 per cent premium to book value. The sale will enable the proceeds to be recycled into one or more properties as the group seeks to achieve further diversification of the portfolio's tenants and assets.”