AN OFFICE block in the centre of Edinburgh is to be transformed into a budget hotel under a £17 million plan that will help restore faith in the city’s troubled trams project.
The creation of a 127-bedroom Premier Inn follows a deal between Consensus Capital Property, the private equity-backed property fund, and leisure group Whitbread.
Located on York Place, the hotel will face one of the main stops on the tram line, which is due to come into service at the end of the month after huge delays and cost over-runs.
The capital’s latest Premier Inn, housed in offices formerly occupied by HM Revenue and Customs, will create about 40 jobs when completed, with around half of the posts being offered to the long-term unemployed.
The deal is one of the largest in the commercial property sector this year, and will see the hotel operator take a 30-year lease on the site.
It also marks Consensus Capital’s move into the hotel sector after building a major presence in the social and residential property market across the UK. The group’s London office opened last year and is working on several developments in the south east of England.
Chief executive Andrew Montague, right, said the Edinburgh deal demonstrated the firm could deliver “structured funding for large commercial projects, which would also deliver jobs and economic benefits”. He said: “This deal and redevelopment represents a significant milestone for us as a company, and we hope it will be the first of many projects with Premier Inn.
“This is our biggest deal to date and brings us out of our traditional heartland of social housing and into larger commercial developments with blue-chip companies.
“The redevelopment of the building is good news for Edinburgh as a whole. Increased footfall in the area will create a stimulus for the city and boost the already strong tourist market.”
Kevin Murray, senior acquisitions manager for Whitbread hotels and restaurants, added: “With a number of exciting new Edinburgh Premier Inn projects already in our development pipeline, we are delighted to announce a new 127-bedroom hotel in York Place. Our latest deal will drive investment and regeneration in the centre of Edinburgh.”
Since launching two years ago, Consensus Capital has funded and exited development projects worth more than £50m.
Property consultancy Savills was also involved in securing funding for the deal, while planning permission was secured in early 2014. The redevelopment work is expected to take between 12 and 15 months.
Strong trading from Premier Inn – which plans to increase its number of UK hotel rooms to 75,000 by 2018, compared with 55,000 now – and sister brand Costa helped trigger a near-20 per cent dividend boost at Whitbread last month