In December, Cain International, the privately owned real estate equity and debt investor, provided a £74 million (€83 million) loan to fund the construction of an aparthotel scheme in the Canary Wharf business district of London, despite the ongoing uncertainty over the future of the hospitality sector.
The loan was provided to landlord Canary Wharf Group, which owns much of the broader estate at London’s Docklands, and edyn, the hospitality group behind lifestyle aparthotel brand Locke.
According to Matteo Milan, principal at Cain, the extended stay apartment model offers guests more space and greater flexibility than hotel rooms. This, he argued, could help the sector to emerge as a clear winner from the pandemic.
“The sector’s business model, designed for long stays, could be even better placed now to benefit from future trends,” he told Real Estate Capital. “If people start traveling less frequently but for longer stays, as we expect, they will probably favour accommodation that offers them broader space and facilities to stay more comfortably.”
The Locke aparthotel in Wood Wharf, a 130,000 square foot development that will comprise 194 design-led studio apartments of approximately 269 square feet and 85 larger apartments of approximately 345 square feet, will offer almost twice the space of a typical boutique hotel room as well as a kitchen and living area. Guests will also have access to a range of amenities including a workout studio, a coffee shop and bar, a rooftop restaurant, private meeting and event spaces, co-working space and around 3,229 square feet of retail space.
Although the hospitality sector is going through the worst crisis it has experienced in a generation, Milan remains confident that those assets that deliver the right offering to their local market will recover faster than expected in a post-covid world.
He expects aparthotels to experience a particularly pronounced uptick in performance. “As businesses look for a more cost-effective alternative to hotels and as increased flexible working might lead more individuals to live further out from city centres, the need for occasional overnight stays or accommodation when working on a specific project will increase, which will strengthen the appeal of aparthotels.”
Milan added that the quality of the sponsors of the development was a key incentive to Cain to provide the loan. “They were the best people to sign a deal with, in this location.”
The scheme’s location also made it an attractive financing prospect, said Milan. It will be in Wood Wharf, a mixed-use area of the Docklands estate, close to Canary Wharf’s major corporate occupiers, and with transport links to the rest of the city. Aparthotels’ supply in the area, Milan added, is scarce but potential demand is there. “It is a natural fit for this asset class in this location.”
Construction of the scheme started in December, being delivered by Canary Wharf Contractors. It is due to be completed in 2022.