• Urban Villa finds shortcut to first aparthotel

Serviced apartment developer and operator Union Hanover has signed a deal that will deliver its first serviced apartment project at breakneck speed. An agreement with UK housebuilder Barratt will see it purchase a block of apartments in a tower project on the edge of London, quickly creating its first Urban Villa hotel.
The deal involves part of a larger residential and mixed use project being developed by Barratt in Brentford, west London, alongside the main M4 linking the capital with Heathrow airport. Barratt has already completed the structure of a 25 storey tower of apartments, and has started selling individual apartments on the higher floors of the project to private buyers.
The deal with Union Hanover will mean 100 apartments on the lower floors will all be purchased in a block. Once fitted out to Urban Villa standards, the new build units will then be able to open as the first Urban Villa property in November 2014.
Barratt had planned the block with a split of serviced apartments and flats for sale, with a ground floor reception for the aparthotel operator. This is a trend that is growing, according to Will Duffey of JLL Hotels, who advised the housebuilder. “It helps to mitigate some risk,” said Duffey, allowing the developer to not rely solely on the private sale market. In planning terms, serviced apartments count as commercial space, so have other benefits such as a reduction in other planning obligations including affordable housing payments. For similar reasons, rental apartments are also attracting the attention of housing developers, as one element of major housing projects.
A JLL report at the end of 2013 highlighted the growing interest in the serviced apartment sector, particularly in London off the back of the 2012 Olympics. It noted that such projects typically enjoy 85% occupancy, against the 81% average recorded for hotels. Longer average stays also reduce administration and staffing costs. At the time, Adam Wilson of JLL commented: “The outlook for the sector is positive because of limited supply, good profitability and high yields. Institutional and traditional residential investors have historically been the primary buyers of serviced apartments, but we are now witnessing specialist serviced apartment operators move into acquisition mode such as Ascott, Frazers and Cheval, which is driving pricing further.”
“GWQ is in an excellent location on the West End – Heathrow corridor, also known as the Golden Mile, which is adjacent to a number of major corporate headquarters such as Glaxo, Sky, JC Decaux, Worley Parsons, EMC and Sega,” said Urban Villa’s Andrew Fowler. “The area is currently under supplied in quality accommodation, particularly in terms of extended stay and corporate housing. And supply doesn’t appear to be going to increase any time in the near future.”
Managing director of Union Hanover and Urban Villa co-founder Eric Jafari added: “The Tower at GWQ was an obvious acquisition for us. It fits well with our growth strategy for the Urban Villa brand in London. GWQ will be the first of six UK Urban Villa all-suite hotels that we will deliver in Aberdeen, Edinburgh, London and Portsmouth over the next two years. October of this year also sees the launch of our first London HOAX Hotel/Hostel at Waterloo, so this will be a busy but exciting time for us.”
Union Hanover was able to win the site, thanks to recent backing that allowed it to buy the project outright. Other bidders are understood to have been operators seeking a lease, alongside separate institutional investors, a less attractive option for the seller.
In March, the Union Hanover announced a substantial equity investment from EquityBridge Asset Management that has allowed it to gear up for faster expansion. It also meant the company could bring a senior executive team together to help plan for the growth, including Fowler, formerly at StayCity, as hospitality director. The existing Urban Villa pipeline already in place means the new Brentford signing will be joined in 2015 by openings in east London and Aberdeen. Projects in Edinburgh and Portsmouth are scheduled to launch the following year.
Jafari said he would be looking for similar opportunities elsewhere. “We’re hoping the structure will set a precedent in the market.” He sees potential in other major mixed use projects where a serviced apartment component could fit; the concept is gaining more visibility with local authority planning departments.
Union Hanover has already received approaches from institutional buyers, but expects to hold the property for the medium term.
Jafari said the serviced apartment market in the UK continues to lag the US in supply, at 2% of the total accommodation market, versus 7% in the USA. “In the US, the extended stay sector is still out-performing the hotel sector in revpar.”
Fowler said the Urban Villa concept has been developed so that each location has its own individual feel. “We’re trying to create the ultimate oxymoron,” with a brand that has a boutique feel. By using a US designer, it is intended that Urban Villa will be scalable internationally, with an edgy look that appeals to those seeking the boutique experience – a niche within the hotel sector that has seen superior revpar growth to the stronger mainstream brands.

HA Perspective [by Katherine Doggrell]: As the corporate market packs up its bags and its encyclopaedia samples and hits the road, it is looking for somewhere to stay and, increasingly, this is not a hotel. The longer the stay, the less the fascination with the concierge – and the cost.
This is something which the US market, with its fondness for sending employees across the country for weeks at a time to install new typing pools and the like is well used to and brands have grown up to reassure traveller and employer alike.
This is not the case in the UK, where the limited number of aparthotels on the market have limited branding recognition compared with traditional hotels. Urban Villa is eager to change this, but will be competing with the likes of Marriott International and InterContinental Hotels Group, which will look to lure existing guests into their aparthotels should demand in the UK pick up.
Outside the existing players, all parties must beware the budget hotels which, not content with taking from the mid-market, could compete with aparthotels too, particularly for guests who are staying for less than 13 nights – a group identified by a recent Savills report into the sector as a key battleground.
According to the report, per 1,000 business visitors London has 1.6 serviced apartments, compared to 5.7 and 5.3 in New York and Hong Kong respectively, suggesting there is room for further expansion. Room here for all, perhaps, but with Urban Villa looking to expand globally, it must make the UK a successful proving ground for its brand.

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