ApartHotels – JAS

It’s been chaos the last few weeks, what with work and trying to organise a little trip to cheer on the boys in Australia this winter. I must admit I’m not too optimistic given their recent form against Pakistan, but hope springs eternal.

In amongst all this I have spotted a new type of investment which grabbed my attention. It’s called an ApartHotel and as the name suggests it’s a cross between an apartment and hotel. I have often stayed in hotels on business for a couple of weeks or more and I’m frequently frustrated by their limitations. Often you just want to ‘kick back’ and watch a bit of TV in the evening on a comfy sofa rather than having to go out to eat or down to the restaurant with only a laptop for company. The ApartHotel allows you to do that.

The scheme in question, Westminster Bridge Park Plaza is being developed by Galliard Homes Ltd who have been developing in London and the South East since 1992. The development will offer a range of studio, one bed and two bed apartments which are all done to a very high standard. Therefore, you get the space and in some apartments even a kitchen to ‘warm’ your own meals; but all with the services & facilities that you would expect from a quality hotel.

Anybody that knows central London will know the site of the development. The 14 storey building will have over 900 units making it London’s biggest development of this type. It will be located right at the end of Westminster Bridge and within a stroll of a number of central London’s attractions i.e. Houses of Parliament, the London Eye and the National Theatre.

So what’s the deal; is there any money in it?
Well you end up according to the developers with a 6% nett yield on your investment; which given the gross yields for Central London are between 4 and 5%; sound pretty good. This yield is guaranteed until 2015. The development is due for completion in 2010.

The property is to be managed by Park Plaza Hotels, which is part of the massive American corporation Carlson Companies which owns a host of leading travel & hospitality brands that includes Radisson Hotels.

The property will be initially sold as a 998 year lease, but then once the rent guarantee finishes in 2015 each owner receives one 943rd share in the freehold. Rent comes from the letting of your apartment by the hotel. Therefore, your returns will be set by the amount the hotel is able to charge and the occupancy rate. Any income will be paid net of the management and maintenance costs.

The advantage for any hands off investor is that they don’t have to get involved in any of the usual aspects of renting out property as all this is taken care of by Park Plaza as the management company.

The whole thing looks very interesting as I’ve been ‘racking my brains’ on how I can capitalise on London’s growth prospects as a leading global centre without stretching my management time too thinly. With the Olympics in 2012 and the attractiveness of London as a place to conduct international business I think this type of accommodation will provide a popular alternative to the ‘bog standard’ hotel.

My one concern is the level of charges that could be levied by the hotel management company. Having several apartments already, where I am paying hefty service charges to managing companies, I’m a little wary. I will need to look at the details as to how the charges are set and how increases are agreed. It’s certainly an interesting concept.