• Folio grows on investor appetite

Folio Hotels, the chain ran by former Regal Hotels directors Nicholas Crawley and Charles Holmes, has added 19 properties to bring its portfolio to 27.

The growth has been made possible by the appetite for hotel property among private investors prepared to offer even start-up hotel operators leases on yields of less than 7%.

Washington Hotels, a vehicle created by father and son Alan and Gary Landesberg, brothers David and Elliot Rosenberg, and Galliard Homes, has bought the latest batch for £116m.

The hotels have been let to Folio on 35-year leases and, although other terms have not been disclosed, previous deals done by these same buyers have been let to Folio at sub-7%.

Folio was formed in late 2004 when five hotels were bought from Corus by Leverguide, a vehicle created by the same parties as those involved in Washington. Among the properties in the £50m deal were the Richmond Hill and Richmond Gate hotels in West London.

The biggest was the Richmond Hill property which was bought for £30m on a 6.35% yield. The 138-room hotel is generating a rent of £2.01m, with rent reviews every five years.

A smaller hotel in the package, the 53-room Buckerell Lodge in Exeter, was sold for £4.1m on an initial yield of just below 7%.

The same investor group teamed up through a vehicle called Jefferson Hotels to buy nine hotels from Queens Moat Houses in October last year for around £100m. In this case, Rezidor leased eight hotels and turned them into Park Inns (one is held on a management contract).

The vendor in the current £116m deal is Malaysian conglomerate MUI which is booking a £300,000 gain on the disposal. MUI owns 99% of Corus Hotels, the group formerly known as Regal.

MUI, which also owns a UK retailer Laura Ashley, has been steady trimming its portfolio to pay down debt.

The last full year accounts for Corus, for the year 2004, show a £6.7m loss of which £4.3m were exceptional items. The five hotels bought by Leverguide generated pre-tax profits of £458,000 off sales of £7.07m.

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