SMART CITY HOSTEL - Savillspdf.savills.com/documents/Smart-City_Edinburgh.pdf · suite, desk,...

S M A R T C I T Y H O S T E L 4 0 - 5 0 B L A C K F R I A R S S T R E E T E D I N B U R G H E H 1 1 N E

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4 0 - 5 0 B L A C K F R I A R S

S T R E E T E D I N B U R G H

E H 1 1 N E

S M A R T C I T Y

H O S T E L


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I N V E S T M E N T C O N S I D E R A T I O N S

> 132 bedroom / 615 bed hostel and student accommodation scheme in the heart of Edinburgh’s Old Town

> Prime Edinburgh location, adjacent to the Royal Mile

> 49 en-suite bedrooms, providing 272 beds, are available 365 days a year for hostel use

> 81 single en-suite bed spaces are leased to the University of Edinburgh for 39 weeks per year

> The University rooms are available as 2 - 8 bed hostel rooms for the remainder of the year (13 weeks), providing an additional 343 hostel beds

> Existing lease to Edinburgh University generating £312,000 pa with 12 years unexpired with yearly RPI reviews

> The asset benefits from consent for interchangeable use between hostel and student accommodation

> Spacious bar, lounge, storage and kitchen amenities provided with vacant possession

> Potential to secure full vacant possession subject to negotiations with the University

> High reversionary value and ERV uplift

> Exceptional opportunity for branding

> Savills are instructed to seek offers in excess of £15,000,000 (Fifteen Million Pounds) for the heritable interest in the property.

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OLD COLLEGE (SCHOOL OF LAW)

SCOTT MONUMENT

GRASSMARKET

MCEWAN HALL & BRISTO SQUARE CAMPUS

EDINBURGH SCHOOL OF ART

SCHOOL OF GEOSCIENCE

NATIONAL MUSEUM OF SCOTLAND

COWGATE

UNIVERSITY OF EDINBURGH, ST CECILIA’S HALL

FESTIVAL HALL

ST GILES CATHEDRAL

ROYAL MILE

PRINCES STREET

BLACKFRIARS STREET

EDINBURGH CASTLE

WAVERLEY STATION


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Bar 50 Reception

Bar 50Hostel Room Internal Courtyard / Bar 50


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FESTIVAL CITY

Edinburgh is world famous for its festivals, such as The International Festival and The Fringe, presenting a stunning programme of world-class classical music, dance, theatre, opera, comedy and literature.

12 official festivals each year

The Fringe Festival: the world’s largest arts festival

Six Nations rugby international games attract c.1m visitors

New Year’s Eve Hogmanay celebrations for which over 80,000 tickets are sold.

TRANSPORT

Scotland’s largest airport, with 40 airlines serving 120 destinations worldwide

Edinburgh International Airport is undergoing a five-year £125 million investment programme to terminal & security hall

Edinburgh Waverley rail station provides regular, direct links to London, Aberdeen, Glasgow and the south.

Waverley Station has benefitted from a £130m refurbishment to improve facilities and increase capacity

In excess of 19.2m people pass through the station each year

A new 14km tram route linking the city centre direct to Edinburgh Airport in 40 minutes.

L O C A T I O N

EDINBURGH - CITY OVERVIEW

Scotland’s capital city is a major tourism centre, a key UK visitor destination and the favourite tourist destination in Scotland, with more than 50% of tourists coming to the country visiting the capital city.

Scotland’s capital city and UNESCO world heritage site

Ninth largest city in the UK

2nd most visited UK city: 10 million visitors annually, generating £1.2bn to local economy

First-class shopping with over 2.9m sq ft of retail

Internationally renowned galleries and museums

Edinburgh Castle attracts 1.2m visitors p.a.

ECONOMICS

The city has a strong economy, balancing financial and business services with software, biotechnology and creative industries making Edinburgh the UK’s strongest regional economy outside of London.

Second largest financial centre in the UK

Edinburgh has led the national recovery (Centre for Cities)

Highest city for private sector job creation outside of London (Centre for Cities)

Leading UK destination for new businesses (Startups)

Strong and growing R&D sector, including new £60m Roslin Institute for University of Edinburgh and £600m landmark development of Edinburgh Bio Quarter.

HIGHER EDUCATION

Edinburgh is internationally recognised as a city of learning, with five universities accommodating 56,500 higher education students, of which 47,000 are full time.

University of Edinburgh is 22nd in the UK (2015) and 17th in the QS World rankings

c. 17,000 international university students in the city (excl. Festival students)

6.4% rise in international students since 2013 (HESA)

10th highest population of students in the UK

Only 30% of full time students are provided with purpose built student accommodation


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S I T U A T I O N

40- 50 Blackfriars Street lies in the heart of Edinburgh’s historic Old Town, adjacent to the Royal Mile, the most sought after location for hotel, hostel and student accommodation use in the city.

The property is situated just 130 metres from the Royal Mile and the city’s finest tourist attractions. At the top of this famous street is Edinburgh Castle and St Giles Cathedral, whilst to the west is Holyrood Palace, the Scottish Parliament and Dynamic Earth. Other nearby attractions include the National Museum of Scotland and the Festival Theatre.

Princes Street, Edinburgh’s prime retail offering is just half a mile away. Waverley Station is situated 600 metres to the North.

The property benefits from secondary frontage onto the Cowgate, a popular night spot for visitors and local students, with a wealth of bars and clubs along the Cowgate and adjacent Grassmarket.

The property is well located for university campuses and amenities; the main University of Edinburgh campus at George Square and it’s associated Student Union buildings are 600 metres to the south, while the University’s music facility is located adjacent to the property. Edinburgh College of Art is approximately 1 km to the west of the property.

Blackfriars streetRoyal Mile


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P R O P E R T Y D E S C R I P T I O N

The hostel was purpose built in 2007 and is laid out over lower ground, ground and six upper storeys. The building provides 132 bedrooms, with interchangeable use between hostel and student accommodation. There are 49 bedrooms in permanent hostel use, providing 272 beds in a mixture of private and dormitory rooms ranging from two to twelve beds. All bedrooms are en-suite and are an average of 24 sq m.

There are 81 student bedrooms, occupying part of the 1st – 5th floors and all of the 6th floor and are based at the rear of the property in a new purpose built building. Each student floor is accessed by secure key card. A double kitchen on each floor serves up to 10 bedrooms. Some kitchens have separate sitting / dining rooms. The student bedrooms are c.14 sq m and are basic in specification. They all provide a wet-room en-suite, desk, wardrobe and single bed. All rooms are provided with WiFi and hard-wired cabling and internal telecoms to the University network.

During the summer months (June – August) the student accommodation is converted to hostel bedrooms. Two floors have a separate common room for students, which are also converted to bedrooms, creating an additional 83 hostel bedrooms and 343 beds, totaling 615 hostel beds during these months.

The reception is located on Blackfriars Street. Secondary access is also provided on Cowgate with a courtyard and a split-level terrace adjoining the bar during bar opening hours.

Hostel bedroom

Bar 50 provides food throughout the day for breakfast, lunch and dinner alongside the cocktail bar. The bar provides a spacious area for games and relaxation with a separate lounge area at reception. The hostel facilities also include a 24 hr reception, lockers, kitchen and laundry facilities.

A one-bedroom, ground floor warden flat, situated in the north west corner of the property is held under separate ownership and does not form part of the sale. There is parking for two cars within the inner courtyard; these spaces belong to the University of Edinburgh.

U N I V E R S I T Y L E A S E S U M M A R Y

The student accommodation is leased to the University of Edinburgh during the academic period. A summary of the lease is below:

Tenant: The University Court of the University of Edinburgh

Term: 8th September 2007 to 31st May 2027

Demise: 81 en-suite study bedrooms with associated kitchens and common rooms

Academic Period: 37 weeks and a variable number of days

Passing Rent: £312,000 pa

Reviews: Annual review, upward only inline with RPI

Landlord obligations: Repair and maintenance

Full details are available on the data room.


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E D I N B U R G H H O S T E L M A R K E T

EDINBURGHQ

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B700 BREAD ST

WEST PORT

COWGATE

HOLYROOD RD

ALBYN PL N C

ASTLE ST

GEORGE ST G

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THE ROYAL MILE

CALTON RD

E MARKET ST ST M

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LAURISTON PL

POTTERRO

W

BUCCLEUCH PL

BROWN ST

JOHNSTON TERRACE

CASTLEHILL GEO

RGE IV

BRIDG

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CHAMBERS ST

LAURISTON ST

SIMPSON LOAN

NIGHTINGALE RD

HERIOT PL

KING’S STABLES RD

CASTLE TERRACE

GR INDLAY ST

MARKET ST

MARKET ST

COCKBURN ST

VIEW

CRA

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SEMPLE ST

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A1 A1 A1

LOTH

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700

EDINBURGH

12

14

4

5

6

7

89

10

11

12

13

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The hostel market in Edinburgh has seen very little growth in supply and, in spite of significant demand for hostels in the city, there are no current planning applications for future supply, offering the incoming purchaser stable market conditions within which to grow the business.

The hostel market currently totals 17 units and 491 bedrooms with Smart City being by far the largest hostel in the city and holding over 21% of total bedroom supply. The Edinburgh hostel market is predominantly independently owned .

Source: AM:PM Hotels

Marker Hostel

1 Brodie 2

2 Royal Mile Backpackers

3 High Street Hostel

4 Cowgate Tourist Hostel

5 Budget Backpackers Hostel

6 Kick Ass Hostels

7 Castle Rock Hostel

8 Edinburgh Backpackers Hostel

9 St Christopher's Inn

10 Princes Street East Backpackers

11 CODE Hostel

12 Caledonian Backpackers

13 Edinburgh Nights Hostel

14 Smart City Hostel

The map and table below detail the current supply of bedrooms in Edinburgh city centre.

(Universi ty of E

dinburgh)

St C

ecilia's Hall

212

32 to 36 53 to

59

Cant's C

lose

31 Car

Park

39

35

26 to 33

45 to

51

and

DW

214

220

52 to

56

Panmure S t An

63 to 67

50

234

57 to 61

230

Hostel

236

5553


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E D I N B U R G H M A R K E T

Bar 50

The market in Edinburgh is an extremely attractive one with year round demand from both leisure and business visitors. Occupancy is strong particularly during the festival period and occupancy levels reached 92.8% in the city in August 2014.

Edinburgh is one of the UK’s leading hotel markets, having consistently achieved one of the highest Revenues Per Available Room (RevPAR) in the UK, surpassed only by London and Aberdeen and has one of the highest RevPARs in Europe. British Hospitality Trends and Development 2012 predicted a 23% increase in the value of Edinburgh hotels between 2012 and 2016, the 2nd highest in the UK after Birmingham. Edinburgh had a strong performance in 2014, retaining its position as one of the best performing cities in the UK.

In the hostel sector, Edinburgh has fewer hostel beds than its European counterparts, with just 5.7 beds per 1,000 visitors compared with 13.1 beds in Berlin. In the last three years, international youth arrivals have increased globally faster than all international arrivals. The hostel and youth market segment is expected to continue to grow apace and with c.21% of Edinburgh’s hostel beds provided by Smart City, the hostel is well placed to benefit from this budding market segment.

Source: UNWTO; Staywyse; Savills

Source: Savills; AMPM

Hostel bed supply in key European cities

0%

1%

2%

3%

4%

5%

6%

3yr ave 5yr ave 10yr ave

Ave

gro

wth

per

ann

um

All international arrivals Youth international arrivals

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Berlin London Barcelona Amsterdam Paris Dublin Edinburgh

Hos

tel b

eds

Global youth travel volumes


E D I N B U R G H S T U D E N T A C C O M M O D A T I O N M A R K E T

Edinburgh is a globally recognised higher education city with a total of 48,715 full time students. The city is home to five universities, including the historic University of Edinburgh (UOE), which receives 47,000 applications each year.

> Five universities

> Three further education colleges

> 48,715 full time students

> University of Edinburgh is the third most popular UK university by applications

The University of Edinburgh (including Edinburgh College of Art) has almost 25,000 full time students, is ranked 22nd in the UK (The Times guide 2015) and is the 17th in the world according to the latest QS World University Rankings. The asset lies just off the Royal Mile and amongst numerous University of Edinburgh academic buildings making it an ideal location for all year round tenants.

Other universities in Edinburgh include Herriot Watt University, Edinburgh Napier University, SRUC and Queen Margaret University.

UK-wide, the 2014/15 student intake has been positive and the most recent data from UCAS has indicated that there was a 9% upturn in accepted university places. The overseas student population has steadily increased over the past decade. There are currently 17,215 international students studying at universities in the city, representing 36% of total HE students which is a far higher proportion of overseas students than the UK average of 19%. This growth looks set to continue, with the most recent HESA data showing a 6.4% rise in international students from the previous year. Scotland’s fee exemption policy for EU students continues to support the attractiveness of the city for such eligible students. International student population growth is beneficial for the studio market in particular. Schemes such as this are especially appealing to international students because of their high quality accommodation and excellent locations. International students tend to prefer to live in purpose built accommodation and are generally willing to pay higher rents, often annually in advance.

P U R P O S E B U I L T S T U D E N T A C C O M M O D A T I O N I N E D I N B U R G H

There is currently a provision of 14,382 purpose built student bed spaces throughout the city, of which 10,065 are university operated and 4,317 are privately operated. The remaining 34,000 students live within the private sector, either in Houses in Multiple Occupation (HMOs) or at home. This means that only around 30% of full-time students are able to access purpose built student accommodation in Edinburgh. This supply and demand imbalance is likely to

be intensified by an increasingly restrictive and challenging planning environment which will limit future student accommodation development and consequently insulate rents and values of well located existing assets. In addition, we expect a continuation in the trend of migration of students from the HMO sector to purpose built housing as legislation tightens and the price differential between the two remains narrow.

1 0Example Student Room

University Accommodation

Private Accommodation

Student’s living in HMO’s/ at home

F L O O R P L A N

L O W E R G R O U N D F L O O R T Y P I C A L F L O O R L AY O U T

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I N C O M E

Historical Trading Performance:

S U M M E R R E V E N U E P O T E N T I A L

Edinburgh benefits from a unique market to drive additional hostel income from the asset from summer visitors. There are 23 major festivals held throughout the year with c. 5 million attendees. The largest of these is the Edinburgh Fringe Festival which attracts an estimated 2.6 million attendees in August. Other festivals and events such as the Royal Edinburgh Military Tattoo, Edinburgh International Festival and Edinburgh International Book Festival and the Royal Highland Show bring additional visitors both from the UK and internationally.

Fuelled by the festival market, summer occupancy is notably high across the city, with rates often at a premium. This demand is further strengthened by the city’s exceptionally strong language school market operating primarily during July and August. Considering the location, the asset is superbly positioned to benefit from summer demand.

2012 Actual 2013 Actual 2014 Actual

Rooms Revenue 1,608 60% 1,625 60% 1,595 58%

Student Income 299 11% 305 11% 313 11%

Other Revenue 756 28% 765 28% 819 30%

Total Revenue 2,663 2,695 2,727

Gross Operating Income 1,740 65.4% 1,813 67.3% 1,774 65.1%

EBITDA 976 36.6% 1,060 39.3% 1,078 39.5%

Source: Hostel ManagementIn £ 1,000’s

P O T E N T I A L S T U D E N T I N C O M E ( A S S U M I N G V P )

Student accommodation rents in Edinburgh for the 2015/2016 academic year are between £135 - £335 per week. For a full schedule of comparable rents, please see the marketing website at www.savills.co.uk/smartcityhostel

For the University leased (14sqm) cluster bed spaces, we would expect rents in this location to achieve a minimum of £175 per week over the full year. This would equate to c.£723,000 gross before 3% void allowance.

Were the hostel rooms to be converted to student accommodation, the rooms (15-30sqm) should achieve a rent between £220-£320 per week per room on a 51 week basis. This would equate to c.£570,000 before 3% void allowance.

The combined gross income, assuming VP and assuming refurbished to provide a high standard of student accommodation could provide c.£1,300,000. We would expect that £1,700-£1,800 per bed space per annum would be a sufficient management cost (subject to third party management budgets). This would result in a net income of c.£1,000,000.

An appropriate capitalisation rate for this scenario would be 5.75% and would reach a Capital Value of £19,000,000 after full costs. This would be before any refurbishment costs are deducted to bring the specification up to a quality commensurate with boutique, high end student accommodation which would be expected on the Royal Mile.

ReceptionCourtyard and rear access to Bar 50


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T E N U R E

Heritable Interest.

Subject to a lease over 81 student rooms to the University of Edinburgh with 12 years unexpired.

P L A N N I N G

Consented use for hostel and student accommodation with interchangibility between uses. The façade at 50 Blackfriars Street is category B listed.

E P C

The EPC rating for the property is F. The EPC certificate is available in the dataroom.

V A T

VAT will apply. However, provided that the buyer complies with relevant conditions, the sale of the property should qualify as a Transfer of a Going Concern (TOGC).

L B T T

Payable at c. 4.45%. Multiple Dwellings Relief on the student element of the property may be available subject to agreement with HMRC.

D ATA R O O M

Please register at www.savills.com/smartcityhostel for further information.

P R O P O S A L

Savills are instructed to seek offers in excess of £15,000,000 (Fifteen Million Pounds) for the heritable interest in the property along with the operating business and benefit of the secure leased income from Edinburgh University.

Available free of hostel management or with the benefit of the existing management team.

Important Notice

Savills, their clients and any joint agents give notice that:

1.They are not authorised to make or give any representations or warranties in relation to the property either here or elsewhere, either on their own behalf or on behalf of their client or otherwise. They assume no responsibility for any statement that may be made in these particulars. These particulars do not form part of any offer or contract and must not be relied upon as statements or representations of fact.

2. Any areas, measurements or distances are approximate. The text, photographs and plans are for guidance only and are not necessarily comprehensive. It should not be assumed that the property has all necessary planning, building regulation or other consents and Savills have not tested any services, equipment or facilities. Purchasers must satisfy themselves by inspection or otherwise.

Designed and produced by Savills Marketing: 020 7499 8644 | April 2015

C O N TA C T S

Robert StapletonDirectorHotel Investment07972 000 [email protected]

Kirsty PerrinAssociateHotel Investment07807 999 [email protected]

Lizzie WhetmanAssociate DirectorStudent Accommodation Investment07807 999 [email protected]

Mark FlemingDirectorInvestment, Edinburgh07815 799 [email protected]

SMART CITY HOSTEL - Savillspdf.savills.com/documents/Smart-City_Edinburgh.pdf · suite, desk,...

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