The Fund concluded the disposal of the Jurys Inn hotel in Derby during March, resulting in an ungeared IRR over the short 2.75 year hold period of almost 19% per annum. The asset was purchased in June 2015 for £14.85 million (£69,718 per bedroom) reflecting a yield of 8.4% to the Fund, with 29 years unexpired on the lease. The rent is subject to uncapped RPI linked rent reviews on a five yearly basis, with the next review due in June 2018. The asset delivered 35% capital growth over the hold period, being sold to an institutional investor for £20 million (£93,897 per key), resulting in a £5.15 million capital value uplift.
Whilst the asset comprises a modern purpose built hotel with a long unexpired lease term together with index linked rent reviews, there has been an increase in hotel supply in Derby over recent years and we had concerns about the sustainability of the income over the long term. Critically, the acquisition of this asset also provided an opening for the Fund to acquire the Jurys Inn hotel in Brighton from the same vendor subsequent to acquiring Derby. Brighton is a core hold for the Fund, and has significantly increased in value since purchase in August 2015.
